Profitable Landlording in a Crisis with Mike Butler, Chris Clothier, and Dave Poeppelmeier

Brandon:
This is the BiggerPockets podcast, show 380.

Brandon:
There could be 10 different plans you have. You’ve got the worst case scenario to the best case scenario and everything in between. And if a resident does this, and I’m going to do this and if they react this way, I need to do that. I mean you have time, but you have to spend time preparing.

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Brandon:
Hey, what’s going on everyone? It’s Brandon Turner, host of the BiggerPockets, real estate podcast here, with my favorites ex wrestler? Did you ever wrestle in High School?

David:
No, I was a basketball player.

Brandon:
Ex basketball player, David Greene. What’s up David Greene?

David:
There was actually a rivalry between wrestlers and basketball players because the season was at the same time and we both wanted to use the gym. So that was lightweight insulting, what you just did.

Brandon:
Was it like the West Side Story where you guys would go out in the street and start snapping your fingers and doing dancing moves?

David:
It looked more like the Michael Jackson Beat It video, where we were holding hands but we also had a knife in the other one and we were like circling and dancing, while trying to look tough.

Brandon:
That’s usually what jocks do in high school. I remember those days. I was not a jock, I was in-

David:
No, you bloomed late. You ended up becoming a man’s man, which you guys will hear about later in today’s show, exactly how Brandon- [crosstalk 00:01:36]

Brandon:
David felt emasculated… Is that the word today?

David:
That’s right.

Brandon:
Because David’s at home and I talked about being on a roof today and David didn’t exactly-

David:
I was at home getting a manicure and lotioning my hands while Brandon was out there living by the sweat of his brow and the cut of his jaw. You got to listen to this episode to the end because it’s very good.

Brandon:
That’s funny. Speaking of today’s episode, we got three guests on today’s episode who are all landlords. We have Dave [Purple 00:02:07] Meyer who is a newer, or maybe not even new is the right word, but he is a smaller landlord with a less than 10 rental units of his own.

Brandon:
Then we have Mike Butler who you may have read his book, Landlording on Autopilot, a very good book. He manages close to 500 rental units and he owns a whole lot of them himself.

Brandon:
Then of course we have Chris Clothier, has been on the show multiple times before. Chris is an investor, but he also runs a TurnKey business that buys, renovates and sells homes to out-of-state investors they’re operating in all of the places. They have 5,000 units now that they manage for their clients.

Brandon:
So we’ve got the entire gamut here of landlords and today’s entire show is on how to navigate this Covid world, this world we find ourselves in today, as a landlord or as a real estate investor.

Brandon:
Even if you don’t have any properties yet, we talk about a lot of just big picture of where we’re headed afterwards as a real estate investor in general. So even if you were not a landlord right now, if you’re a flipper wholesaler, a house hacker or whatever, you’re going to get a lot of valuable information today out of this show.

Brandon:
We got some really smart guys and myself and David as well. So with that, David, let’s get to today’s tip.

David:
Today’s quick tip is location matters. When you’re looking at where to buy a rental property, there’s more and more people that are starting to work from home and the long distance investing thing is starting to pick up some tracks.

David:
People are realizing I could work from home so I can buy a property from home. Don’t just look at cashflow. That’s one of the siren and the old tales of sailors that are getting pulled out to sea, and brought to their debts. That’s cashflow. It calls to you and it says I will meet all your needs and I’m perfect and it’s a mirage. It’s not always true.

David:
You need to consider location. The properties that you’re buying will tend to be rented by a certain demographic of people. So, one of the questions I always ask my agent every time is, what kind of people live or rent in this neighborhood?

David:
What I’m looking for is not necessarily how much money they have, but what type of job they work in. Are these Hollywood actors, are these construction workers, are these firefighters? What type of person because certain jobs like a firefighter are much more recession resistant.

David:
Other jobs like a tech worker, they can work from home. When you’re having a slowdown, like a virus related thing, because you got to think this Corona thing could happen again. There could be another outbreak.

David:
This is something that we should plan for. Other industries like someone who works in a warehouse and stands in an assembly line and stamps metal, they’re not working from home.

David:
So, when you’re buying properties, consider that. What is the industry that your tenants are going to be working in and are they going to continue to have an income stream if we have another shutdown like this?

Brandon:
That was today’s not so quick tip. You did great, just kidding.

David:
Not quick. You’re going to know what you throw to me, it’s probably going to be a medium one.

Brandon:
It’s a long tip today. With that… No, that was really good advice. When you say cashflow is the siren, David is not saying you shouldn’t buy for cash flow, you shouldn’t look at cashflow, he’s saying that’s all you’re looking at because sometimes you think you’re getting a good cashflow and deal, but then your tenants destroy.

Brandon:
One of my worst deals ever looked great on paper, but the tenants has kept a store in the house, and it was a bad neighborhood and I couldn’t attract the right tenant. The house itself has so many weird things about it that my “cashflow” ended up being nonexistent.

Brandon:
So, there’s more to a deal than looking at that number of what cashflow comes in. You look at the holistic, the entire deal. Now without any further delay, let’s get to our interview with Dave, Mike and Chris.

Brandon:
All right, gentlemen, welcome all to the BiggerPockets Podcast. Good to have you all here.

Mike:
Thank you. Hello.

Brandon:
All right. Before we get into this thing, deep into the world of how this Corona virus stuff and how the social distancing is affecting landlords today and real estate investors, I wanted to take a second to have each of you introduce yourself for those who might not know you.

Brandon:
Why don’t we start with the man who’s been on the podcast now, this is number four. You guys all know who he is, Chris Clothier. Chris, tell us about yourself real quick.

Chris:
Since the last time we were here, not a ton has changed, we’re still operating. Wait, what am I saying not a ton has changed? We have been known as Memphis Invest, be were branded, this past year to REI Nation, after entering into our seventh markets. So we’re doing what we’ve always done.

Chris:
We’re buying houses in seven markets, having fun renovating them. We’re managing a little over 6,000 units today for single family passive investors. Other than that, I have no more kids, I stopped at five, so that’s an update. The company’s growing, we’re having fun and doing our thing.

Chris:
This is a challenging time, but up into this day, we kept doing what we do, what we’ve talked about so many times on here. Being good, buying and selling and occupying and managing.

Brandon:
I wondered when you were going to change the name because it wasn’t super clear, Memphis Invest in Dallas, it was like, wait, is it Dallas invest? Is it Mexican?

Chris:
When we hit the halfway mark, when we had sold as many houses in markets, not named Memphis as we had Memphis, we knew we had to make a change there to be more reflective of who we were. We’ve been planning it for a few years and did it January 1st.

Brandon:
Very cool. Of course the people want to hear more about Chris’s story. You can go back and listen to the episodes he’s been on. I will put links in the show notes at biggerpockets.com, that’s Show 379. Now let’s go to Dave [Purple 00:07:35] Maier. I hope I’m saying that last name right, Dave. Is that correct?

Dave:
Close enough.

Brandon:
Now tell us about yourself. Who are you? Where are you at in the world? What do you do in real estate?

Dave:
Once again, my name is Dave [Purple 00:07:48] Meyer. I live in Toledo, Ohio. My wife and I own houses in the Metro area. We started buying houses in 2013 basically straight off of rich dad- poor dad. So once again a lot of investors, that was the big eyeopener for us.

Dave:
Since we had no idea what we were doing, we actually did his full system and everything and it was great. Slowly but surely we’ve been adding houses. We have eight houses and we focus mostly around the University of Toledo. We liked the student housing.

Dave:
My wife and I both went to University of Toledo, so we know the area and it’s cool giving back per se. The fact that we actually give students nice houses live in and not the cesspools that I may have not been sober in once or twice back then. Just like everybody else, we’re planning for the worst and hoping for the best with everything here in this market, but we’re not letting it slow us down.

Dave:
We’re still looking at acquiring more houses and are buying our first four-pack of houses for the first time ever. So we’re rocking and rolling still.

Brandon:
On the four-pack. Did you get like a buy three get one free discount?

Dave:
I would love that, but no.

Brandon:
Finally, for many of you needs no introduction, but we’ll give one anyway, Mike Butler. Mike was the author of Landlord On Autopilot, which you’ve probably heard me talk him on the show before because that book, Mike, made such a massive impact on my wife, Heather and I, when we were getting into Real Estate.

Brandon:
We got that book from the library, then we went and bought it. It was being underlined and highlighted and our entire world was built off your model in your book. So, thank you for joining us today. Mike, tell us a little bit about yourself and how you became the godfather.

Mike:
Thank you Brandon. I’m here in Louisville, Kentucky. I started my investing while I had a full time job as an undercover police detective doing murder for hire, contract killings, organized crimes. I was on a bomb squad. So I love adventure.

Mike:
We’ve got hundreds of rentals here in my hometown. I like to do it in my own backyard, in one county for one legal system, one court system, and it works. Never in a million years did I dream that I would be here on this call with you, Brandon and all these other experts.

Mike:
I grew up in a poor end of town, typical story, but oldest of seven kids in the blue-collar neighborhood. So, real estate is unbelievable. Changed my life, gave me true financial independence and I want to help others achieve that as well.

Brandon:
That’s awesome man. Definitely you guys check out Mike’s book, it’s so good, Landlording On Autopilot. Again, like I said so many of our systems are built off of what you taught so, very cool. It’s an honor to be here today with all three of you guys today.

Brandon:
Why don’t we start with, we heard a little bit about what your markets are like. I’m going to actually jump in and ask, Chris start with you because you’ve got 6,000 units you’re managing across what, seven cities you said?

Brandon:
So you got a pretty a nationwide view or at least, somewhat nationwide view of what’s going on. What are you seeing right now? We are recording this by the way for everyone listening. We’re recording this on Monday the 13th of April. The show comes out a week and a half after recording this.

Brandon:
So there might be some slight changes between now and then. Forgive us for the rapidly changing world around us, but what are you seeing right now Chris?

Chris:
The biggest change that we’ve seen right now has been remarkably, it’s being communication that, we’re even about on all of our numbers as far as the number of properties that have paid their full rent, the number of residents that paid rent in advance.

Chris:
Before the first day of the month, the number of residents that paid by the due date, which in Texas is the third and in all of our other markets was the sixth this month. All those numbers remain remarkably the same. What changed was the communication.

Chris:
We had a lot of communication beforehand from our residents. We did not do any outreach on the front end, but we decided to wait and manage case by case because everybody knew rent was due April 1st.

Chris:
What we found was a lot more open outreach from residents. They know that they’re in a precarious situation, they’re trying to communicate in advance of, “Hey, I lost my job, I got laid off, I got my hours to cut”, whatever their duress have being.

Chris:
We have found ourselves managing this list of people that are proactively outreaching saying, “Hey, this is my scenario. What can we do to kind of work together?” because nobody wants to lose their housing right now and nobody wants to be in a scenario where they’ll lose it in the future.

Chris:
That’s been a shocking thing to us. So far has been that, rather than going and having to chase people down, we actually had a lot of people very proactively come out and say a lot.

Chris:
We found it to be about 8% of our entire portfolio did somehow reach on the front end. Out of that 25% of that 8% paid full rent on time, no issues, but they wanted to communicate that, “Hey, we’re seeing some, some signs in the future we may struggle.”

Chris:
It was one of these so far that, the communication has been really upfront and very proactive, whereas we were anticipating a real struggle. So far it hadn’t been that way.

David:
One thing that’s unique about your situation Chris, is you’re in seven different markets and you’re doing a large volume. You probably have the most accurate information from a sample size perspective. Has your company noticed a difference in one area versus another with how tenants are acting? Who’s paying, who’s not? Or has it been pretty much uniform across the border?

Chris:
We don’t vary a lot in the price point of a property. We may be in seven different markets, but price point is generally the same until you get to Dallas and Houston where it’s just more expensive so the rents are higher.

Chris:
We were anticipating to see the same numbers across the board. What we found is that the smaller markets, the tertiary markets, like heck I’m not even sure that little rock would be a tertiary market. I don’t know what the number is for a fourth level market or what the name is.

Chris:
Like Little rock and the Tulsa and Oklahoma city, we found these markets paid almost a hundred percent in full on time. We had very little disruption in those markets. Whereas we’ve got the most properties in Memphis and in Dallas and Houston. We saw a little higher level of disruption in those markets.

Chris:
For whatever reason, if we’ve seen a variation in collections, that stuff, it’s been in those markets. They’re carrying the biggest load of no pays or slow pays or those that are in complete duress lost their job and struggling.

Chris:
We haven’t seen it by price point, because we don’t manage enough varying price points.

David:
Did you proactively reach out to your tenant pool and talk to them or did you wait for them to call you? How did you guys handle that?

Chris:
No, we debated amongst our executive team a lot. I was very pushing for us to get something out back around March 20th. I wanted to be way out in front, but I give my dad a lot of credit because he took everybody’s opinions, including mine.

Chris:
I was pretty forceful and just said no. He justified it by saying I don’t want to have to communicate with our residents over and over again as things change. He’s like, “What we’re going to do is we’re going to have a plan on dealing with those that are having trouble.”

Chris:
We also had a plan for each step of the way on times when you’re late, whether you’re making a plan or not making a plan.

Chris:
So rather than trying, and I’ll give you a great example of this. We decided one of our options was let’s go to all of our residents and give them a price break right off the bat, and tell them, if you pay on time, you get a price break.

Chris:
That’s not being very responsible with our owner’s money because that’s their money. Our rationale was that a majority of our residents would be able to pay on time. They weren’t going to be in duress, and we were right.

Chris:
Here we are today, we’ve collected roughly 90% of the rent that has been built. By the day it was late, we were over 70%. If we had given discounts in advance to get people to pay on time, we would have gotten the same amount of money or the same number of units would have paid their rent.

Chris:
They all would’ve paid a lot less, and that would have taken money out of the owner’s pocket. So we said, let’s manage the exceptions rather than the rule, let’s not go out to everybody. Let’s let this play out the way it’s going to play out, then we will work with residents on a one on one basis rather than trying manage this whole big pool with one policy.

Brandon:
That was one of the points I made early when I made a video on BiggerPockets that got a lot of views early on. We’re sending this letter out to tenants and before the letter one came out, and another video that said that the most important thing you can do is have a plan in place that you’re going to do.

Brandon:
Now we in house, in our company say, “This is what’s going to happen if tenants don’t pay rent.” But the distinction is, “What if tenants can’t pay rent?”. “I can’t pay rent because…” If you give them the option of not paying rent, most of them will not pay rent.

Brandon:
But we internally, and I’m sure all you guys do is, what if they don’t pay rent? That’s a different question. So we chose the same as U-Crest, we did send out a letter, but we didn’t give them options, we didn’t give him a discount, we didn’t give them anything like that.

Brandon:
We just said, “Hey, you still got to pay rent.” If they don’t pay right now, we do have a plan for that and I’d like to talk about that with you guys in a minute, but I’m curious, Mike, Kevin showed me your letter that you sent tenants.

Brandon:
I know you sent something to tenants as well, is that true?

Mike:
No. Here’s what I did. Congratulations and kudos to Chris. 6,000 units in seven cities. That makes my head hurt, but we’ve got as far as the number of units, we’re 500 units and I got excellent staff and team leaders.

Mike:
So here’s what I did. When all this stuff first started popping around and like Chris said, around March 20th or so, might’ve been few days before that, I went, “Oh no, I got a plan right now.”

Mike:
So, number one is I don’t want to call up or be proactive, reach out to, “Hey if you have trouble” or “Get a discount” because they’re going to, “Yeah, I’m having trouble.” So, what I did is how could I effectively communicate to them that they have to pay the rent?

Mike:
Keep in mind, back then they were talking about you don’t have to pay rent for two months. The court, no foreclosures or no evictions for two months, and that kept getting extended. So I’m like, “Holy cow.” Then you’d see on Facebook rent strikes, remember that kind of garbage.

Mike:
Majority, not all, but maybe I’m going to ballpark it, two thirds of our residents live paycheck to paycheck. They’re going to freak out if they lose their job and they can’t really function too well.

Mike:
What I did is I went on one of my website and I put something about, I want to protect my staff and employees. So we created the Wendy’s Walk Up Window. Nobody has to deal with the public.

Mike:
I’m serious and there’s picture of it on our website. So I created the Wendy’s Walk Up Window and on there I said something about, “If you expect to have trouble paying rent, click here.” When it goes over there, it’s not pretty, I just banged this up real fast to get it out.

Mike:
It was something along the lines like this, “Corona virus outbreak or whatever, you must pay rent, your rent is not waived.” One of the questions I put in there, I said, “If you need help getting your free $1,200 Federal…” the feds promise like $1,200 before the Care Act was passed, I have something like that on there.

Mike:
I said, “If you expect that you might have trouble, then click this link here” and it goes to a page with six links. Talks about how you can get the unemployment… Headed Federal, State and Local, and our local government there idiots.

Mike:
They basically got what’s called a Neighborhood Department. They got $3.2 million, go get in line, they’ll give you money for stuff. So, we started getting, believe it or not, I was terrified when all this initially rolled out.

Mike:
I didn’t want to send something out under everybody’s nose because they would participate. Yeah I want a discount, but I felt compelled to put something up there for those. We started getting cheques from these local agencies for their rent before April 1st. I was shocked.

Mike:
Then the folks who had trouble paying rent on April the 3rd, that’s when we normally send our late pay or quit possession notice goes out. So we looked at that and I was shocked. I was expecting April to be a blood bath with 33% of tenants, resident or renters being unemployed.

Mike:
It was like Chris said, it was about total 8%. What I did is this something unique, we’ve never experienced this before. So rather than try to adapt all of our property management software and everything like that, I created what I called Corona tenant or resident hot-sheet.

Mike:
It allows my resident manager, she was keeping notes in a notebook and she asked me to help her create this. I created this thing and now at a glance I can see the status of everybody there.

Mike:
Remember I said the paycheck to paycheck people, those are the ones that can’t function. So the paycheck to paycheck people, I want you to think relationship wise, like remember, Leave It to Beaver?

Mike:
This is how I train Carla, my resident manager and I gave her two extra helpers, to be proactive to reach out to these people when they haven’t paid their rent. You’ll discover great residents who haven’t paid. They’re terrified and they can’t function and their world’s all upside down.

Mike:
So we reach out to them June and Ward Cleaver, call them by their first name a lot, “Hey Chuck, what’s going on? I see this never happened before. You haven’t paid your rent.” So Chuck is going to say something, and Chuck’s going to bump his guns a whole lot. Let him throw up.

Mike:
Because now he’s getting that cancer out of his belly and who gets credit for it? You do. So, what our goal is to get Chuck to make the rent payment, go into the APAL and get paid first.

Mike:
We’re going to offer them all kinds of ways to get some help. Even offer, and I know this sounds goofy corny for Chris because his staff doesn’t have the time, but like Jr. Ward Cleaver. “Hey, well what bills you got? Can you defer some of these? But you got to pay your rent because your landlord got loan payments to make, and if you don’t make your rent payment, they can’t make the loan payment, you could lose your home.”

Mike:
So ultimately we want them to pay it all. That’s our goal that’s what we strive for. If they say, no, I can’t do it, blah, blah, blah. Well, how much can you pay? That’s the last resort. When they get down to that, if they got say a thousand bucks as a rent, and they say they can pay 600 bucks.

Mike:
“Well I’ll tell you what Chuck, let’s get that 600 bucks in here right now, and that means there’s $400 lease. That’s going to help you not lose your home. Now let’s get that 600 bucks in. Now we’ll take the 400 park it on the shelf. We’re not going to forget about it. Okay. And when you get back up on your feet again, then we’ll take whatever, how much you still owe.” We’ll craft some payment plan that won’t cramp your lifestyle and it will be a win.

Mike:
I was shocked. I was expecting, we prepare for the worst and hope for the best. When you’re hearing stuff like 33% of the tenant or renters are unemployed. That was as of two days ago. Who knows what it is today, but we’ve got some great residents and I love them.

Mike:
Now if you’ve got eight quality staff that live in that gated communities, you’re not going to talk to him like Jr. Ward Cleaver, but the paycheck to paycheck people, yeah. The ones like $22 a week to run a toaster. Turn off that toaster rent. Let’s pay your rent.

Brandon:
What I like about what you’re saying Mike, and this is the same thing probably all of us are is like you got to give your tenants options. Like part of the job of a landlord is to be there to help process through the difficult situation of your tenant.

Brandon:
We don’t have to, but it’s a complicated time. We were literally having the website available like, “Here’s how you apply for unemployment” because I know tenants who had no idea even how it worked or how to apply for it. All they know is they lost their job. Let’s help them.

Mike:
You’re exactly right, Brandon and here’s another thing that goes with that level of a tenant. They can live in nice homes too, but you want to be like, I mentioned June and Ward Cleaver, I keep saying it all the time, that don’t expect you can make a proactive phone call and they’re going to perform.

Mike:
They paid the rent, what makes you think that they’re going to be responsible after the phone call? I like to give them a deadline. “Okay, Chuck. Now when are you going to apply for this or call this agency? Now when are you going to get that done? I’m going to check back with you Wednesday. You say you can have it done by Tuesday. I’ll give you an extra day. I’m going to check back with you Wednesday.”

Mike:
You do follow up with them, and what that does is it makes them subconsciously the psychology of it, it makes them feel valued. Like you care, like you’re trying to help them. That’s what you want, that’s how you’re going to get good tenant retention. So, the followup on that is as important is reaching out and being proactive.

David:
One of the thing I liked about your method, Brandon and I talked about this a lot, when you’re referring to psychology. When people are unsure what to do or they’re scared or oftentimes when they’re in a position where they’re not in a position of strength.

David:
When they’re out-leveraged, or they don’t have a whole lot of re-courses, like a tenant’s going to feel when they’re not working, they don’t have a lot of money, is they’re usually looking for someone to make an enemy. They want to, like Brandon always says, someone wants to be the villain in their own story. They want someone to be a bad guy and [crosstalk 00:25:41]

Brandon:
Did you just quote me? You just quoted me. Wow. I just got quoted by David Greene. This is great.

David:
We’re also assuming Brandon actually came up with that quote, that he didn’t hear someone else say it and then quote it.

Brandon:
That is my prior.

David:
I’ve indirectly plagiarized someone because of Brandon. What you’re saying is it’s actually like a police tactic. I’m sure that’s where you picked up that skill because we learnt to do that all the time.

David:
I think, I’m sure, that’s where you picked up that skill, because we learned to do that kind of stuff all the time. You’re going to make them do what you want them to do. They’re going to pay that rent. But you don’t want them to feel like that’s what you’re doing it, so you give them options. You tell them, “Hey, here’s a list of places you can go to get help.” Did they need to get that from you? Probably not. They probably heard about this stuff in other places, but by you offering it to them, it makes it hard to not like you. Makes it hard for them to make you the bad guy. It makes them difficult for them to say, “Screw that guy. I’m not paying anything.” That’s very wise that you’re basically, “No, you’re going to comply. You’re under arrest. But I’m going to let you feel like, you have a say in how it goes down.”

Mike:
Well, that’s what I’ve trained my staff to do, that are reaching out to them. I’ve got a dedicated page that has six links for them to see the benefit. So, we ask them, one, “Do you have access to the internet or does your cell phone? Can you go to the internet? Well, go to our website and see where it says, residents, touch that. Now, here’s the list.” And the links are in there. All they got to do is click on it to get started. The phone numbers are there, everything. And we encourage them instead of, most folks are expecting their landlord to call them up and beat him up, “Where’s the rent? Where’s your rent?” That’s the villain that you guys are talking about. But instead, I want to offer help and make them feel like we’re offering them solutions to help them in this crisis.

Brandon:
Well, to go to the villain example, so I don’t want to be the villain in the story, right? There’s actually something called the hero’s journey. I was like, writers know about this when they are writing. And a lot of sales guys talk about this as, there’s this journey that everyone goes through. And as a business owner, you don’t want to be the hero. You can’t be the hero. The customer is the hero. This is just sales stuff. Who’s that guy that wrote that book? There’s a really good one about it.

David:
Donald-

Brandon:
Donald Miller.

David:
StoryBrand.

Brandon:
The StoryBrand. Yeah. Yeah. StoryBrand. Still good. But he makes it go, “You don’t want to be the hero,” but he’s, “You don’t want to be the villain. You want to be the guide.” Right? And that’s what we’re doing by helping our tenants. I mean, besides the fact that this is a sales thing, whatever. We legitimately, are the guide. The landlord should be the guide. They should not be the hero or the villain. Our job is to both help our owners, if we’re managing for other people. To make sure it’s profitable. But we do that, by making sure our tenants stay for longterm. They can pay their rent. And so, we are the guide in between everybody. And so, we’re making this thing happen. I’m curious, if I could bring in Dave in this part. What did you see? Was it better than expected? And did you preempt anything with your tenants or did you just rely on waiting for them to call you?

Dave:
Being smaller and mainly working with college students, I did actually reach out. When students move in, I have with them, I call it the dad talk. “Have fun. Don’t destroy the house. Pay the rent and enjoy your time.

Brandon:
Dad talk, I love that. Exactly what that is.

Dave:
It is. And so, I’ve got three kids, so it’s that time. So, yes. So, I actually send out texts. And actually, I’m on the board of one of our local investors groups, Property Investors Network here in Toledo. So, we had this discussion at our March board meeting. As everything was going on, it’s like, okay, us smaller people, what do we do? And so, we have all agreed that we’re just going to text. Text works great obviously, for the younger generations in things like that. So, all I did was, all of my groups, I have five groups of students and three just normal residents in our houses. And I just send out a text saying, “Hey guys, how are you doing? Are you okay in this craziness?” And that’s all I did. And so, I got a lot of texts back. “Yeah, we’re doing good. Hey, thanks for checking on in on us.”

Dave:
I mean, there was a lot of gratitude from our residents, and especially the students too. I mean, they went from a normal spring semester to all of a sudden, now all their classes are online. They’re not seeing anybody. And some of them are essentially trapped in these houses in Toledo. I know a bunch of my students who live up in Northeast Ohio, two and a half hours away. And so, it’s not like they can just pop back home. So, that went really far I feel. And so, once again, being small enough I can do that.

Dave:
And then, here in Toledo too, I sent a follow up text a couple of weeks later checking in again. Say, “Hey, how are we doing with paying rent this month?” So, I didn’t just come out of the gate like, “Yeah, where’s the rent?” But the second one was like, “Hey, if you’re going to have any problems, please let me know.” And so, when I moved people in, once again, that’s one of the biggest things I go over, is just communication, “Please don’t stick your head in the sand. I’m here to help you. I’m not big money pocket bags investor, I’m like you.” So, yeah.

Dave:
So, here in Toledo, they also have, if you dial 211, it goes straight to the United Way. And so, through the United Way, there’re all kinds of, once again, how to file for unemployment, assistance with utilities, all that kind of stuff. And for one house, I did do that. I told them about 211. And then, I don’t know, if they did anything with it, but yeah, so I was more upfront with the communication. But once again, I’m smaller, I don’t have 6,000 units to manage, so I can do that. And actually, and it worked out really well.

Brandon:
That’s cool.

David:
Are any of you guys utilizing some of the programs, that Mike gave to the clients as far as Paycheck Protection Program or any of the other government loans?

Chris:
When you say utilizing, what do you mean David?

David:
Have you applied for any of them or have you seen any money show up?

Brandon:
Yeah. All the SBA stuff and the Paycheck Protection, just all the stuff that governments now come out with, to help business owners. As business owners, are you guys getting that at all?

Chris:
So, as a business owner we absolutely applied for that, but we don’t have anything. I mean, I know that’s probably a very normal thing that most business owners are saying, right now. We’ve done the application, but the banks don’t know what’s going on. Nobody really knows what’s going on. We haven’t heard anything back yet.

Brandon:
We applied for the paycheck protection thing, which is two and a half months to payroll. So, we got like 75 grand approved on paper, like in an email, it says that it’s been approved. And I haven’t seen no money.

David:
Congratulations.

Brandon:
Thank you. Yeah. So, I’ve got a piece of paper saying that I am approved for a $75,000. And then of course, some people are saying it’s forgivable, but then it’s not actually in the paperwork. So, we don’t really know, if it is or not. The whole thing is just, who would expect the government to be clear? I don’t know.

Mike:
I got something to add to that. When this all first got started, I was attending so many webinars and educational things and all this. And then, only to discover that one webinar says, “Well, they changed this two days ago, now they don’t have as many steps.” And I’m like, “My God.” All my hair out. So, I don’t want to be an expert on that. But my wife is doing all that for me. But I will say this, apart from that stuff, if you can help it, one of that was really weird, was economic disaster. Remember that one? EIDL [crosstalk 00:32:36]. Yeah. It used to be complicated. Then it got simple. And they said, “Go ahead and apply for it. And if your application is pending, or even if you get denied, apply again. And we’ll send you a $10,000 of forgivable loan.” So, that was bizarre.

Mike:
And I heard this on a webinar, that I think is super sharp. I’d like to share with everybody on the call. If you do get any kind of this Care Act or any kind of Corona money, or loans or what have you, that has a specific purpose, read the fine print in it. And this is beautiful. Let’s say, that Brandon said, you got in the email money for the PPL or PPP, let’s do this, to protect yourself, okay? Open up a brand new bank account and put that money in a brand new bank account used exclusively for the things involved with that. And don’t put it in your operating account. And that way, you got a bank account that supports, that you complied with everything that is required.

Brandon:
That’s smart.

Chris:
Yeah, we had heard that, if you thought it was difficult to get the application done for the PPP, then wait till you apply to have it converted to a grant. So, one of our friend of ours in the lending world, they told us the same thing Mike, said that was, I guess, a big opportunity to protect yourself and make it easier on yourself in the back end, is to have a separate account just for that particular money. Should you get approved, should you actually receive it, so that you can run everything through it and have a nice easy, good looking paper trail for it.

Brandon:
Yeah. That’s smart.

Mike:
You talk about opportunity on her Brandon. One thing that a lot of folks are just ignoring, because Times Square is empty and Vegas Strip is black and all this. But the feds, we haven’t heard too much about this lately, but the feds just lowered the rate. They say almost 0%. So, I believe there’s going to be all kinds of opportunities in the near future, whenever this starts to wrap up and the economy gets going again. So, stockpile cash and ask whoever you do business banking with, credit unions included, see if they have adjusted their investor loan products. And see what the interest rates are. I mean, if you could get two and a half percent fixed for 30 years, would you borrow a million dollars?

Brandon:
I think so.

Mike:
I would. [Crosstalk 00:35:12].

Chris:
A lot more than that.

Mike:
Yeah. I’m not trying to freak anybody out. But take a good look, we were all at home. You can’t go anywhere really. So, take a look at your rentals, your portfolio, and this includes, Dave you as well. And try to touch base with the loan officer that you deal with, those different banks or whatever you’re talking about and see, if they have an investor loan product that has been adjusted to the newer rate. And here’s how I know, that they’re going to do it, is because… Have you seen that? What is it, NewDay USA, the veteran loan company?

Brandon:
Yeah.

Mike:
You remember that they make home loans for veterans.

Brandon:
Yeah.

Mike:
About two or three days ago, I saw a commercial on TV, where they said that, “Refinance your home, this is the lowest rate ever.” Not in recent years. Not in this decade, ever. So, they’re taking action on that. And hopefully, some of that trickles down to us.

Brandon:
Yeah.

David:
The other side of the grants and loans was the forbearance and the deferment. And I know Dave, you have a little bit of experience with that. Do you mind jumping in and sharing what you’ve been doing as well as what you’ve been recommending when it comes to loan forbearance or payment difference?

Dave:
Sure. So, the one out of my eight houses I did have, basically when I bought the house in January, I knew the tenants were barely straightened by it at that point. And so, once this all hit, it wasn’t surprise that they’re the first ones that came forward and said, “Yeah, there’s no way we can make the rent.” And so, I have that house and then another house, these two houses are in a new LLC of mine, that the lease is up in April. And because we can’t show set house, we have no one to live in that house after April here. With those two I have with their commercial loans with a small local commercial bank.

Dave:
So, I emailed Shannon, my loan guy and I said, “Hey, here’s what’s going on. Can I Get some kind of deferment for the three months with this cares act and stuff like that?” He’s like, “Yeah, sure. Let me get that paperwork out for you.” Okay. Great. And I’ve actually talked to him since and he says, “Yeah, everything looks like it’s approved.” Now, with the deferment, there’s still interest being accrued, but for the three months, there’re no payments. But what will happen is, I have a 10 year balloon payment, so they’ll just wrap those three months into the end of the balloon. And so, that’s going to help me a lot, because these two houses are not going to have money coming in. In fact, I’m going to put some money in them to get them spruced up a lot.

Dave:
Now, my other houses, I have four other houses that are rentals that are in my personal name for the loan, 30 year fixed. So, I called up that mortgage company and asked the same thing. It’s like, “With COVID 19 here, I’m a little concerned about these next couple of months. Is there any way we can do a loan deferments that way I stay out of trouble?” And their answer was, “Well, no. But we can do a forbearance.” And so, now the legal definition of a forbearance is, it’s just an agreement with the banks. It’s saying that, if you do this, we won’t foreclose on you. And so, with what this bank was willing to do, is they were willing to have me not make payments for three months, but then all four payments would come due at the same time, that fourth month.

Brandon:
That’s exactly what I got from my bank.

Dave:
Yeah. And so, I don’t see how that helps a whole lot of people. So, I said, “Thanks. No, thanks. On that one. But yeah, I’m sure a lot of newer investors like myself, I mean the easiest way to get going in investing, if you have a decent well paying job, is to get a 30 year fixed loan in your own name. I mean, especially now, like Mike said, with these rates being ridiculous, I wish banks would loan to me that way still. But yeah, so I’m sure there’s a lot of people that are in a similar boat, where they’re just starting out. They have two, three, four houses. They have loans on them. So, I would say, that you call your bank and ask for a deferment first. And just be upfront, and just know what you’re asking for. And yeah, I mean, give it a shot. Why not? I mean, can’t hurt to ask.

David:
To clarify that, a deferment would be putting the payments at the end of the loan and the forbearance is having a temporary break in the payments. And then, they’re all going to be due at once. Is that what you’re saying Dave?

Dave:
That’s what this bank did. Now, other banks might make some other kind of arrangement. And the forbearance is just basically, an arrangement with the bank. For me, with my deferment, for me it would be at the end of the loan, because it’s a 10 year balloon. But if you had like a 30 year fixed, I don’t know, if they would just reconfigure the payments. I know the interest part of the payment will be higher. So, that might change your actual monthly due. But yeah, that’s what I was told.

David:
I’ll let you jump in. One second, Mike. I just want to make a point. It’s very important that you listen to what Dave is saying. And when you call your bank or you talk to whoever, that you don’t use verbiage that means something to you, that means something completely different to the person you’re talking to, right? That you go ask for forbearance, but what you really wanted was a deferment. And they grant you what you asked for and then you find out four months later or three months later, you have to make all four payments, right?

David:
I see this problem often, especially as a real estate agent who’s helping to sell houses. When we talk to clients or you’re talking to a lender and you say, “Oh, this is an investment property.” And in your head what that meant was, “I’m buying it, because I want it to be worth more money later. It’s a good investment.” What the lender heard was, “Oh, you’re buying this to rent out. You have to put 25% down.” That stuff can happen very easily. So, specify in plain terms what you’re looking for. Don’t just throw around these fancy terms trying to look smart, because you can get yourself in hot water. Did you want to jump in now Mike?

Mike:
Yeah. I had a couple of things to add. And I work with investors frequently, but here’s the question I’d like for you to try it on your lenders, certainly the ones that have been actually with you. So well, what if I just made interest only payments? If I made interest only payments, could I do that for three months and then kick back in? And then, of course the balance wouldn’t drop. But we’ve had some success with that working with investors. And then, the other thing I want to just, I can’t emphasize as much as what David just said, it is just super important. Okay?

Mike:
If you hear the word forbearance, okay? If they use that word, that will be a red flag. Dig into it more, find out exactly what they’re talking about. And then, they’ll talk about, if so you defer payments and then, they use the word forbearance. Well, then that means the unpaid payments got to be tacked on to when the next payment is due too. You’re going to have a big payment to make there.

Mike:
And then, the other word to look for or listen for, is if you hear the word modification, hit the pause button. Because what they’ll do, is they will combine the forbearance and they’ll talk about it, “Yeah, we can do a loan modification.” Which basically means, you’ve got to reapply for a brand new loan and they’re going to up the interest rate. It’s creating a brand new loan. So, if you hear modification that sounds, that’s like a slick way to not tell you, “You’re getting a new loan.”

David:
Yeah. Interesting.

Brandon:
Yeah. So, just be really careful about, get really good details from these lenders. And like David said, everyone’s got their own little definitions here of what things mean. And so, make sure you guys aren’t applying for something you shouldn’t be applying for.

Mike:
If you don’t understand it a hundred percent and you’re not clear, get with somebody who does understand it, and find out exactly what it is. Because dude, I mean, never mind, I’ll shut up.

Brandon:
Hey Chris, I want to jump into you real quick and ask, because, I mean, all of us are dealing with this, but you on a much grander scale with so many units, repairs and maintenance. How are you dealing with problems when they come up? Or have you noticed a huge float down and people calling or because they’re all at home now, there’s a huge uptake in people calling and then, how are you dealing with it?

Chris:
To date, so since really, we’re talking three weeks in, we have not seen a noticeable uptake in calls. One of the things that we are implementing is quality of life issues. So, we’re focusing heavily on quality of life. And for instance, if you’ve got a major plumbing leak, if you’ve got a AC unit that’s gone out, or a furnace that’s gone out and depending on what the weather’s like, we are making sure that we’re addressing issues that are quality of life first. If they are minor, we’re asking the resident to address those themselves and show us what they’ve done in that scenario.

Chris:
But it’s interesting because it’s not just rental collection and, “Have they paid rent?” And where are we at in that cycle. But it’s also, I think, it’s probably where you’re going is, it’s the COVID 19. They don’t want people in their houses or vendors don’t want to go into a house because they don’t know. There’s a lot of questions about what we can and what we can’t do. So, we instituted a policy with our residents of quality of life issues will be addressed immediately in the way that we’ve always addressed them. And then, there’s a scale of the severity of the problem and is it going to damage the home itself, such as a slow leak. You may say, “Well, that’s not a quality of life issue.” But it’s going to lead to major damage to the home.

Chris:
So, there’s something that Mike had said earlier, and I just want to say this just briefly, what we’ve had to do over the last three weeks, is retrain our team. There’s a new set of rules for operating right now. And so, with us, we’ve got a rather large team. There’s probably, a ton of landlords that are managing their own properties. And some that are small management companies that are listening to this. This is very disruptive, not just in the, how are you going to do business but how are you going to do business? How do you go about your day? So, we had to create brand new scripts. We had to train the team. Go through role play, so that they’d be prepared for the questions and the responses and the way they’re going to handle scenarios that come up.

Chris:
And so, with repairs and maintenance, this is a big thing. With a large company like us, part of the way we’ve always done businesses, is that rents, there was this cashflow cycle. And so, oftentimes an owner wouldn’t have to send in money to cover certain low costs repairs or up to a certain dollar point. But now, that you don’t know what’s going to happen with rents and you don’t want to apply someone else’s rent payment to repair on a different house, that makes sense because of the cashflow. So now, that’s a whole nother change and adjustment, where now owners have to pay for repairs in advance to ensure that their particular bill is paid by their money and not by someone else’s. Does that make sense? Did you follow all that?

Chris:
I mean, when you’re talking about millions and millions of dollars moving, and what we quickly recognized was, if there’s a hiccup in that, and 60% of the rents are collected, which was this big fear that everybody had was, would we only collect 60% of the rents? And you did work on someone’s house that no rent was collected on. You literally just use someone else’s money to pay that.

David:
So, basically, your company would collect all the rents from all the properties, hold them in a fund or an account. And before they were paid out to all the owners and you kept your portion, some of that money could be made to pay for repairs, which was reimbursed later. But now you’re saying, if all that money doesn’t keep coming in and you’re putting money out to make repairs that aren’t for the specific property of the money that came in, that person might not get their cash.

Chris:
Well, you’re having a way that that money flows through a company. And so, you don’t have 6,000 different accounts for everybody, but you account for it in your software, where money’s all going. But if those bills never stop, the repairs never stop and rents are not supposed to ever stop. So, the money’s always, there’s no issue with it matching up, until all of a sudden, one day, no rent comes in. And then, you had this list of bills here that needs to be paid. And so, what we had to institute was all owners. It’s something we never ever had to do before, that you had to pay for repairs in advance. To make sure that your rents properly taken care of and that, you don’t have funds that move the wrong way, if that makes sense.

Chris:
And so yeah, there’s just this whole new way of how to do business today. And that was a great question there, because it’s not just, does a vendor want to go into a home and do work, but it’s “Ma’am, what work needs to be done? How has it paid for?” How do you tell a resident that this is something that they need to take care of and they need to send you pictures. And because it’s not a quality of life issue and maybe they get reimbursed. I mean, it’s created a whole new dynamic to how things operate.

David:
And that’s how every business is dealing with it right now. They’re all trying to figure out, can I keep employees on staff? How many can I keep on staff? Who can I keep on staff? Who could work from home? How long can I keep them off? It’s tricky.

Chris:
Yeah. That was the thing that, I would say, that we’re still most concerned about right now. Is that, even if you feel like you’ve got control of things right now, and like the data I gave you earlier, we feel good that we’ve got control of what’s happening right now. We have no idea what’s going to happen in May. We have no idea, is it going to change? And we’ve got to make more adjustments.

Brandon:
Mike, did you want to jump in?

Mike:
Yeah. I’ve got so much on repairs and maintenance. Okay. Number one, remember the TP scare?

Brandon:
Yeah.

David:
Yes.

Mike:
Okay. So, when that happened, we were proactive. And my resident manager fired out a text, an email, and a voicemail blast, that every resident, “That the only thing that goes in your toilet is toilet paper. Nothing else.” Okay. “And if we catch something else or have our plumber pull something else out, then you’re going to have to pay for that.” So, we train all of our service techs to take pictures of front of house, back of the house. He took pictures of paper towel, a roll of paper towels sitting on the sink next to the toilet. Guess what he pulls out? Paper towels or baby wipes or whatever it is and all that. When they pull that stuff out, they take a picture of it and they’re getting paid. So, once we did that, boom, we don’t have anymore. So, they’re listing on that, one there.

Mike:
And another great opportunity, I like what Chris was talking about, you got to make some adjustments. And quality of life is very important. But two things. One thing I want to point out is, before this Corona virus hit, what was one of the most number one complaints? There are questions that investors and landlords had, how to find good contractors? How to find good help? Nobody wants to work. Well, guess what? We just hired two guys that over 20 years experience HVHC, where the HVHC company laid them off. So now, is a great time. I mean, it’s a little bit frightening. Okay. Because you’re thinking, well, cash flow, what have you, but you can get some good quality help right now. They’re responsible people, are hungry, they want to work. And so, take advantage of them.

Brandon:
I’ll get my whole deck stain in my house right now, because the guy that works. So, I’m like, “All right.” [crosstalk 00:50:03]

David:
The number of calls I had about business has dropped a lot, but they’re all about, “Hey, are you thinking about changing industries? Do you want to get into real estate sales? I need a loan officer for this new company. Do you want me to get loan officers?” You got to think like that, because every single time that there’s a change in standard operating procedure, something gets harder, but something else gets easier. Right? Opportunities don’t just disappear. They just move. They go to a different place.

David:
In fact, I was having this thought the other day that, we get a recession every seven to 10 years. People hear that all the time, but we never really talked about, why? Why do we have to get a recession every seven to 10 years? And one of the reasons I think it happens, is that we do things a certain way. Technology will catch up, so like the dot-com industry. Everybody needed a website. If you could write code to make a website, you were just a god, right? Everyone needed you. We paid a bunch of money. Then software improved to the point that it wasn’t hard to make a website anymore. And they didn’t need to pay people a lot of money. All those jobs went away. Boom, there’s a recession. And you stay in a recession, until those people go learn new skills, they get in a different industry, they become useful again. Now, they start making money and then the economy goes up.

David:
It’s a healthy thing to have these ups and downs. But my point would be, you need to understand that real estate investing is not different than any of these other jobs in an economy. Things change. It’s okay for things to change. There’s going to be things that shift around and what you’re talking about is a really good example of that. The people who recognize, “Oh, the opportunity is somewhere else.” And make the move faster, are the ones that tend to do better.

Mike:
I got one more that nobody’s never heard of yet. Okay, I’ll bet you. Okay. They’re talking about all this, the Care Act and all this relief money and this and that. I was thinking, wait a minute. I know Chris has this. And I know Brandon has this. I’m not sure, if Dave [Pepperman 00:25:42], did I say that right?

Dave:
Yes.

Mike:
Okay. Good. I’ll hit a home run. All right. Or David Green. But I’ve got a business insurance policy, so I’m a broker as well. And I don’t do listings, so I’m not interested in that. But I have to be a broker to have my own in house property management company, that might want to manage properties for others for a fee. So-

Mike:
The management company that might want to manage properties for others for a fee. So some of the risk I have is, I asked my insurance agent before I hired him, “If I send somebody over to a house that I don’t own and they fall and trip and get injured, does my insurance cover that?” He said, “I don’t know.” I said, “So go find out.” So he does. So I’ve got this big business policy for my C Corp for my property management company. And I asked him, I said, Ferrence is his name is from Hungary. I said, “I got business insurance, right?” And he goes, “Yeah.” I said, “What about the loss of income, or business loss? And just about three or four days ago, I heard Trump talking about that.” He says, “I got insurance for that.” And I don’t remember what part he was talking about.

Mike:
So I called up my insurance agent, Don’t send them an email, don’t call their office and talk to some CSR person. That’s their helper. Because they’ll bang it in your account and that inquiry will kill your insurance code, just like a driving record. Talk to your insurance agent and ask them. He says, “You know what Mike?” He says, “You’re not the only one that’s asked that. And our leaders our wizards in the sky up at corporate. They’re going over that right now and see what they can put together.” So I think it’s a brand spanking new one and they’re not going to offer it to people. It’s going to be up to us to be proactive. Reach out there and ask him about that and he seems to think we’re going to get something for it.

Brandon:
Interesting. Yeah. I’d never even thought about the lack of income, lack of income insurance or what do you call it? Lack of-

Mike:
Trump called it a business loss or loss of income or, I don’t know. I don’t know. But I think everybody here knows what we’re talking about. So I ask him, ask him and see. If you’ve got a business policy that, you might have a line in there, that says something like that, they really don’t want to point out to you.

Brandon:
Yeah it makes sense.

Mike:
Because if I hail damage, I’ve never had an insurance agent call me and say, “Hey, how many you got Mike?”

Brandon:
Yeah that’s true. You got to be proactive about it. I like that, that’s good. That’s a good tip. Hey Dave, what about you in terms of repairs, maintenance, anything that you’re seeing right now in your business?

Dave:
No, not a whole lot of change. Once again with eight houses, we get the small stuff once in awhile. But I still, once again just from a customer service, keeping my tenants happy. And once again it’s kind of like comfort food right now. When you call up your landlord, your owner and say, “Hey, you know this step’s almost ready to break.” “Yeah, we’ll get there tomorrow.” And, I am very fortunate, in fact I have speaking of staining the deck, I have my trusted HVAC guys at my house right now. Because I’m getting exhaust re-vents because in, because I’m putting a bathroom in my garage, because I’m living in my garage right now as a physical therapist. And so it’s just, we have great HVAC guys. We found some great plumbing guys who are really getting our core team kind of set up. And so once again, I have the ability, being small enough, to really still do all the little stuff and not have it kill me. So, that’s nice.

Brandon:
That makes sense. Last week my tenant, we’ll call him my tenant, Ryan Murdoch. You guys know about who I’m talking about, who’s listening to the show right now. Ryan lives in Hawaii here, he runs my mobile home park business and Ryan actually is sort of my tenant. He lives in like the extra house, the mother-in-law house or whatever you want to call it, on my property. Anyway, so he comes down and he’s like, “Dude, it rained last night and I got a hole in my roof.” We knew it was there for a while, but it got real bad. He’s like, “It was just pouring in.” He’s like, “I got to get this thing taken, we got to get it taken care of today.” I was like, all right. And I’m thinking, who do I call for that? And I’m like, you know what would be more fun?

Brandon:
Me and Ryan on a roof. So we literally in flip flops, went on his roof up on the second story and we completely re shingled a good chunk of his roof. And you know what? I didn’t have to do that. And there’s no lesson in there, other than it made me feel like a man. That was it. I was just like-

David:
Everyone needs to recognize Brandon is manly and handy and better than you are.

Brandon:
That’s what it was. It was like, I can handle this. So sometimes here’s my lesson I’m going to pull out of that. Sometimes it’s okay to do your own work, David, cause it makes you feel like a man. I felt like William Wallace, that’s what it was. And then I watched Braveheart that night.

David:
If that’s what you need to make you feel like a man then I support it man. Like whatever it takes. Testosterone replacement therapy, roof replacement therapy. Chris showed up in a pink shirt today to let us all know that he’s a man. Right? That’s kind of a common theme of what’s going on here.

Chris:
I’m telling you. Yeah. Now I’m going to put a roof on later, but I’m wearing pink now.

David:
I think putting a roof on in pink is the ultimate boss move.

Brandon:
I don’t think that’s a bad idea.

Chris:
I don’t think it is either.

Dave:
100%.

Brandon:
Well we all know Chris is a man. He runs like you know, super long races. So you’re more of a man than me Chris, it’s good. All right guys, I want to move to an opportunity. We mentioned opportunity, we mentioned the shift. So I wonder what do you guys think for the future? Where is this headed? What kind of both challenges and opportunities are we going to see? And obviously none of us know, this is pure speculation. We don’t know if this is any next week or next month or 18 months from now.

David:
But you will be quoted exactly for what you say and ostracized if it’s not perfectly correct, full disclaimer.

Brandon:
Yep and if you offend somebody, John Oliver will be doing a segment on you. So what do you expect the future to look like here going forward? What’s changing about our industry? Whoever wants to jump in first, feel free.

Chris:
Well, which industry are you talking about? You talking about the management or?

Brandon:
Let’s go just real estate. Real estate in general, we’ll say real estate investing in general. So whether it’s from the management side or you know, flippers, wholesalers, rentals, real estate investors in general.

Chris:
I’ll keep it really short, in that. I don’t, like none of us knows, as you said, what is going to change about our particular industry. But I do believe, just like every other real estate cycle in the past, it’ll all be local and you will see dips, you’ll see some markets that won’t have any disruption at all. But what will remain the same is that the, I’ll use the word intelligent and I’ll use it loosely. The intelligent investor who is willing to be patient and diligent in the way they’re going to invest. And they understand what they’re doing and why they’re doing it. They will have no problem. This will not be a disruption for them. They will continue on doing what they’ve always done. There’s opportunity to invest today. It’ll be there tomorrow, it’ll be there months from now, but it’s going to go to the people that are, as I just said, in my opinion, that are patient and diligent with what they’re doing and they have a purpose behind their investing.

Chris:
I guess the other thing that remains true is that those that aren’t will make some bad decisions and some will lose money and some will lose investments. I think that what’s funny about real estate is that it always, whether it’s changing, it always remains the same. Those that are smart with their decision making and do it purposely, will be okay and those that don’t, may not. Probably not the answer you were looking for as far as [crosstalk 00:58:55] but that answer won’t get me in trouble though. David Green, you can’t quote me on that one later. I was spot on no matter what happens.

David:
You’ve got a career in politics Chris, I was thinking that while you were talking, look at this artful dodger. Just making his way, using so many words yet saying nothing at the same time.

Chris:
I’ve got a lot of practice.

David:
Mesmerizing.

Brandon:
What about you guys? Mike, what do you got?

Mike:
Here’s what I see. Okay, so right now we’re in the midst of something we’ve never seen before and we’ve had an economic meltdown for the most part. And so what’s going to happen whenever we start to come out of this, as much as everybody wants to, they’re not going to be able to flip a switch. And we go back to the way it was the day all this started. So we’re going to have a lot of folks going to have a lot of problems. So I do encourage you to find resources to cash, stockpile cash. Do some cash out refis because here’s where the opportunity, I think, for a lot of investors. Especially those who want to grow their business, think about, for how many years had the interest rates for homeowners been super low.

Mike:
My daughter has a 2.9% something fixed for 30 okay. If they hit the wall and they and their business just evaporates and disappears, but they can’t make a payment of any kind. So if you’ve got some cash you can step in and jump the loan and buy that property and hopefully put them in another one of yours. If you’re going to jump a loan and take over payments on somebody’s loan there, don’t let them stay in the house. Because I did that one time and that was a big mistake. Just imagine because I was trying to be nice, be helpful and they stopped paying the rent. I go to the victim them and the judge, they show up with an attorney, says, “How can you evict my client when they still got a loan on the property?” So, that was ugly. So if you’re going to jump a loan and take over payments, make them move, they can’t stay there. And if you’ve got cash, there’s just going to be a boatload of those coming down the pike. And that’s a future opportunity that I see that’s going to be a no brainer.

Brandon:
All right. What do you think Dave?

Dave:
Well, kind of being, hyper specific being around the university of Toledo and the student housing. I guess my fortunes are tied to, do my students go back to school next fall? If you can do school online, I guess our biggest concern is do the students that we have signed leases for, for next year, do they actually show up and move in? But honestly, I think one thing that we saw in the 2007 eight nine recession was everything collapsed. So what do parents tell your kids, “Go to school, so you can get a good job.” Hopefully the enrollment stays up and then once again, our non-student tenants, same things as you guys. I’m hoping that they keep jobs, that they can keep payments. Hopefully their mom or dad can help out.

Dave:
So but yeah, once again, I’m trying to keep plowing forward. We’re still looking for things that are coming on the market. And so yeah, I wasn’t around for the 2007, eight, fiasco slash opportunity. And so if this is going to be another one those, this is one of those where, yeah I mean it’s a little scary especially being a newer investor. And I still have a job and everything, but yeah it’s, I just want to keep my eyes open. And once again, we have kind of a mission, being from the university, from Toledo, things like that. And Toledo’s just a great place to invest. I mean this is a great town and like I said, my residents have been great through all of this. No one’s been saying, “Oh, I’m going on rent strike.” Or anything like that. People have been really cool for all this. So that’s helped a lot.

Brandon:
Yeah. That’s cool. I got a-

David:
Brandon, you’ve kind of been in the epicenter of this whole thing. Do you want to share your opinion on how you think, like the whole crazy COVID real estate scare? I mean, to be fair, we all look to you for strength, certainty and hope in these uncertain times. I’d like to hear what your thoughts are on how you think real estate is going to change.

Brandon:
Oh, you’re funny. I actually was just going to ask you the same question. I wasn’t going to be as a condescending about it but I was going to.

David:
Yeah I saw what was coming out of your mouth.

Brandon:
Well, first of all, okay, so here’s the question I was going to pose to you guys and I will pose it to you. I’m just curious like vote, we’ll vote here. Do you think this whole thing is going, because we’ve said it before that companies who have always required their office workers to work in an office, all of a sudden now we’re being forced to do it at home. So are they going to go, “Oh my gosh, we can work from home. Why am I paying office rent?” And that’s going to just decimate office buildings across the country. Or is it going to be the opposite, everyone’s like, “I’m so tired of being at home. I’m never working at home. I’m going back to work with my friends because they’re all at work. I’m tired of my kids right now.” Right?

Brandon:
So I’m wondering and the same thing for students, kids in school, right? So Dave, with you, are people going to be like, “Oh my gosh, I can do school from home. Why did I ever go college?” Or is it going to be like, “I miss my friends. I’m going, like why would I ever do homeschool home college?” So what do you guys think? Is it? Which way is the economy moving? And then I’ll offer my thoughts.

Dave:
Well I think, from the university point, no one wants to do classes online. I’ve been doing a couple of things at houses here and there before all the lock downs hit. And a group of guys are, they’re in chemistry. It’s like, how do you do your lab online? I mean you can’t, and so I think for the university kids, they do not want to do things online at all.

Brandon:
What do you think Mike and Chris, I’ll go Mike first. Are people going to shift away from offices and schools or is this all just going to blow over?

Mike:
Well, I’m going to steal a phrase from Chris. He talked about the intelligent investor, the intelligent business owner. I think with zoom meetings, okay, their stock has just gone through the roof. But I think the intelligent business owner investor are going to now see how they can. Can work from home work for my business? And I think those folks are definitely going to implement that, especially if there’s some way for them to use a zoom meeting or something to make sure that they’re not piddle farting around or outside shooting a neighbor’s dog or something. But I think other folks are going to say, no I got to have people in my office. So I don’t know which way that’s going to go. It’s an excellent question. That’s yeah, that’s pretty, I have no idea. I’ve got folks that work from home and they live in one in Missouri and one in Georgia. And they’ve always worked from home.

Brandon:
What do you think Chris?

Chris:
I think you’re going to see the start of that transition to more working from home or mobile, office scene or whatever they, whatever you want to call it. The outside of the traditional office space. My dad is still our CEO and he is very old school. And he will never go to work from home, this is killing him right now. It is but he’s super old school, that’s his way. He wants to see people, he wants to interact with everybody that works for us, our team. Part of it is to hold them accountable.

Chris:
And part of it is cause he’s very, that’s just the way he was brought up. That’s the way he’s been in business for however many years now. He’s been working for 50 something years. He’s, that’s just him. And so he said it to us again. He’s like, “We will never be a work, totally work remote.” But I think that you’re going to start seeing some of the younger generation, younger business owners, those that are coming up in this environment. They’re going to say, “Hey, this is, if this can work, why would we take on that expense?” And yeah, it’s not just rent but it’s everything. It’s the utilities, it’s the insurance. It’s every little piece that comes on to it. If I can just take a little piece of that with a zoom account or whatever other, Slack and Salesforce and every other different way of monitoring what my team does. I think you’re going to start to see the slow transition of more and more people working remotely.

Brandon:
This is an analogy, watch out David Green, there’s an analogy coming. All right, so my dad is retired, but he still goes back to work occasionally. Up until the last couple of weeks, to work at his old job, they hire him back. Because he just wants extra money and he’s got some time to kill. So I ask my dad, I’m like numerous times, “Why don’t you just go drive for Uber? Or go drive for Uber, you’ll make more money than you’re making at your job and it’s way more fun. You’d probably actually enjoy.” Because my dad’s a talker. He loves talking and you’d meet all these cool people. You drive around and work when you want work, don’t if you don’t want. And he’s like, “I don’t understand that technology thing, I don’t know how to use the Uber, I don’t know, whatever.”

Brandon:
But if suddenly he was forced to go and drive Uber for a week or two weeks or three weeks. He would realize, “Oh my gosh, Uber is so much better than what I was doing.” And he would be an Uber driver. I guarantee it. In fact I might even, next time he comes out here for like a month, next winter just like set him up. And take him out and show him how to become an Uber driver because I think he would just love it. So it would require something to be forced upon him for him to be able to do that. I think that’s what this is going to cause is a lot of forced action that’s going to change behavior longterm. Things like shopping on, I think Amazon was already a powerhouse. I think Amazon is going to become 10 times the powerhouse that it already was.

Brandon:
I think, what’s the guy who runs that thing? The billionaire, why can’t I remember his name?

David:
Bezos.

Brandon:
Bezos, right. That guy, I think a hundred billion dollars net worth is nothing compared to what his net worth will be in five years from now. So I think things like that are going to force, the office buildings I do think are going to struggle. Not all of them, it’s not like a hundred percent are going to close. But I think if you saw a 10 or 15 20% drop in the next couple of years in the offices, I think that’s entirely possible. I think that we talked about this a couple of weeks ago. I think nursing homes are in trouble. I would not send my parents to a nursing home right now. Because I’d worry about future viruses and how quick they spread throughout them. I think that, but like David you said there’s shifting opportunities, not like they’re not going anywhere.

Brandon:
So I think there’s opportunity for more the mother-in-law houses. Like what Hawaii does and California does a lot is the extra unit. I think there’s a lot of opportunity for that. I think those box houses, that come in on a trailer and they set them up and a day later they got a house. I that is a huge opportunity.

Mike:
We used to call them dumpsters.

Brandon:
Dumpster that unfolds into a house. I think there’s some crazy cool stuff out there. I think there’s opportunity there, I think that’s it. So David, what do you think? I’m going to ask you though, Green what do you think?

David:
I think-

Brandon:
People look to you for hope and for-

David:
Yeah, there it is.

Brandon:
Trust and they want to know what you think David? Because you’re out here-

David:
They just come to me when the line to talk to you is too long. I’m like the other, in and out looks too long, I’m just going to go to Carl’s jr. So that’s what I’m. Actually what’s funny you said is, I have a listing coming to the market, in a week or so here. And with it is coming an RV that is, it’s in working order, it comes with the house. And he’s renting out the RV for a thousand dollars a month. So there’s the house, there’s a studio that they rent for like 15 or $2,000 a month, and then an RV that also is a thousand. So it’s going to be like 10 minutes from Facebook, really close. And whoever buys it is going to spend like $1,500 a month to live there. Which out here, they would be spending five or $6,000 that’s what your mortgage would be. So yeah, I do agree with you, I’m looking actively for more ways to keep housing costs low.

David:
What I think that the Coronavirus is going to do, is it’s going to signal the beginning of the end of the, “I get paid by the hour.” Structure that we have right now with business in general. I think everybody here that’s a business owner, I see Chris nodding his head. He knows where I’m going with this, knows that plan, I guess, of paying people that way was developed from a factory. Where you sit on an assembly line and you stood there and you put things together and so they knew you were working. Otherwise, your assembly line would get stacked up and it’s continued. But now you can have an employee that goes in the office and does three things the entire day. And you don’t often see it because they get paid by the hour. And it brings this mindset that because I’m here, I deserve to get paid. And if I have to work when I’m here, well I’m doing extra.

David:
But from a business owner perspective, all we care is, I have a task that needs to get done. I would happily pay somebody per task and they could make more per hour than paying somebody per hour and trying to have to manage and supervise and make sure they’re doing the thing that they need. So especially with a business like mine, that’s a pretty good size, but it’s not so big that I need a full time accountant and a full time web person and a full time, a lead source. The leads come in and they determine who’s going to get this lead, or how are we going to follow up with it? I don’t need, there’s not enough for one person to do one job, but if I hire one person to do all those jobs, now I got to just watch them all day long to make sure that they’re doing something.

David:
There’s plenty of opportunity to work from home if you’re productive, if you’re good at what you do, if you’re the so good they can’t ignore you and you can convince a company. Because all the company cares about is that project gets completed. That thing that they need done gets done. They don’t need to pay you per hour. And what I’m getting at is the only reason they make you come into the office is to make sure you’re working, right? Why be there if you don’t have to be there, you can be at home. It’s because so many people won’t work if they’re at home.

David:
So if we move away from the pay per hour and we get into the pay per project, well then it’s on you. You could be at Starbucks, you could be at your house, you can be at the beach, you could be in the office. You could do whatever the heck you want as long as you’re getting it done. So I don’t think this is going to happen right away, but I think that this is starting us down that path to breaking that reliance on the dollar per hour pay structure and getting into a dollar per task.

Brandon:
Deep.

Chris:
Oh, I like that. I just took a lot of notes there Green. You’re, I’m going to use a lot of what you just said in my future arguments for having to get moving away from this hourly stuff. Because you’re right, this is, it’s just nuts and I’ve said what you just said. And it’s interesting because right now this is going to force many companies to institute a policy of I’m not paying you to show up. And I love what you said about, people take that take the hourly income as what they’re getting paid to show up and work’s going to cost you extra.

Brandon:
Yeah.

Chris:
I mean, if you want me to do something, I want you to pay me more. And I thought you just pay me to walk through the door. And that’s it, it’s so interesting. It’s so interesting that you just said that because that’s an argument I’ve been making the last couple of weeks. So there’s just like this, there needs to be a fundamental shift in the way that businesses, especially big ones like mine that have a team of over a hundred people, of just how they operate.

Chris:
And to Brandon’s point, this new work from home environment, is that going to change? Is that going to change? The way people are paid for performance rather than paying just to hold a place, a desk in an office.

Mike:
I think Jeff Bezos has already implemented that and verifies what David’s thinking here, because didn’t they take a lot of their drivers, their employees and set them up, gave him 10,000 bucks and a van and turn them into independent contractors and they get paid by the piece or by their results? That’s huge.

Brandon:
Yeah. Yeah, really. Yeah, a hundred percent agreed. I think that’s where the world’s moving. I think that, also one final note is, I think more and more people, I always say I hope that they’re going to start thinking this way. I think, I hope more and more people start realizing I cannot, one, I can’t live paycheck to paycheck forever. I can’t rely on this job forever. Because even people who thought they had a super secure job, even like yeah I work at a restaurant, people always need to eat. All of a sudden don’t have that.

Brandon:
And so my hope is that this becomes a wake up. I think that books like rich dad, poor dad are going to come in really handy right now. I think a lot of people are going to read that and go, “Oh now I understand why this is important, why financial freedom’s important.” So if anything I think our industry is going to, from a education standpoint, is going to see an explosion in the future. Same with any online business, people learning to code, people learning to be consultants, like all that stuff. I think people will be like, “Oh.”

Brandon:
Because I mean if you hear what a lot of the really smart people are saying is this COVID thing going on right now isn’t the end. This is an increasing problem with like SARS and H one N one. And now what happens when the next thing doesn’t have a 2% kill rate, it’s got a 12% kill rate? Or a 30% kill rate, right? And that stuff is likely in our lifetime. I think that the fear before was terrorism was going to kill us all. And now I think the fear is, hugging your neighbor is going to kill us all. And so I think yeah-

David:
Maybe it’s the handshake that goes away. The only thing that changes in 2020 is nobody shakes hands anymore.

Brandon:
Nobody shakes hands, yeah. We’ve just got to bring the Hawaiian Shaka for everything. Hawaiians figured it out years ago. We’re just like, “Hey man, what’s up brother?”

David:
Save lives with the Shaka.

Brandon:
Yeah, save lives with the Shaka, there you go. All right guys. Well, we got to get out of here a little bit. So one, I want to ask one more question from each of you, I’m curious. And then we’ll kind of do some wrap up work. People can get to know you more and reach out. But first, I’m just curious if you had to speak directly to a landlord right now, think of our average user right now, our average listener out of the quarter million, some people who listened to the show is probably youngish, I would say between 25 and 45 they have a few rental properties, maybe five, 10 rental properties that they manage themselves. Or maybe they have a property manager, but they’re fairly, I don’t call it hands on, but they’re at least involved. Right? That’s our most likely person who’s listening. What do you say to them right now? Whether it’s advice, warning, encouragement, whatever. What would you guys say to those people listening right now who are just newer landlords? They’re just like, yeah the average American under 10 ownership landlord. Chris, you want to go first?

Chris:
Yeah, yeah, that’s fine. Yeah, no, I’ll tell you straight up that I wrote this in a forum on the bigger box forums a couple, I mean a few days ago. That it’s not too late to plan. Many people that I spoke with directly, froze. Just as we were talking about the, as Mike was mentioning, the resident that freezes when they’re scared or don’t know what to do. We saw a lot of business owners, I spoke to a lot of small management companies. I spoke to a lot of individual landlords that did not know what to do and they also didn’t have a good group of mentors around them. They didn’t have anybody to bounce ideas off of. And as I mentioned, we’re in there having these heated debates on what to do. So we had all these different ideas flying around so it was easy to make a decision.

Chris:
Whereas somebody else, when all those ideas of flying around their head, they don’t, a lot froze. So my biggest thing is, it’s not too late. You have to prepare for what’s coming next. You have to prepare for, and I said it that there could be 10 different plans you have. You’ve got, the worst case scenario to the best case scenario and everything in between. And if a resident does this, then I’m going to do this. And if they react this way, I need to do that. I mean you have time, but you have to spend time preparing. I’ve been telling people these last few weeks that I’m actually very optimistic. I’m very encouraged and I have a lot of confidence in what’s going to happen next, especially when it comes to our company. And I told them that the reason why is because we’ve spent so much time preparing, that we’re not going to be surprised. No matter what happens, we will not be surprised in May or in June.

Chris:
What happens, we will not be surprised in May or in June. Sales go up, sales go down, rents go up, rents go down, whatever happens with the maintenance, calls go through the roof, calls stop, it doesn’t matter. No matter what comes our way, we prepared for it and we’ve prepared our team for it. So if you’re a landlord, if you’re a small business owner, no matter what it is, and you may be stuck in this idea of “what’s going to happen next?” Well you don’t know the answer to that and neither do we. No one does. But what you can do is control how you react and you prepare yourself kind of through stoicism by accepting that the worst case scenario can occur. And if it does, how do you react?

Chris:
And if you have already prepared for that on the front end, it makes it easier in a way to take action and function each day. If you haven’t prepared and haven’t thought about it, it’s almost like the lack of preparing, just starts snowballing. So my big thing to everybody was, it’s even whatever today’s date is, today’s the 13th, it’s not too late. Start now. Start today. Start tonight. It’s okay. You’re breathing, you’re still alive and kicking. So go to work preparing for how you are going to be prepared. That’s my best advice, I guess.

Brandon:
Can I expand real quick on what you said there? Just offer some commentary. So a couple of weeks ago, back when I put out the first video on BiggerPockets a few weeks ago that went, I don’t want to call it viral, but it has a couple 100,000 views now, and it was basically, “here’s my five point plan.”

Brandon:
In fact, I might even see, in fact, I’m just going to say it, we’ll put the actual video, the audio from the video at the end of this podcast episode so you guys can hear it, of what my five point plan is. We’ve already talked about all this stuff today. I’ll just have Kevin throw the audio on the end of this episode when it’s done. But basically that was my wife and I sitting down for 20 minutes looking at each other going, okay, what are we going to do if? And us just going through it. And honestly, we didn’t know the answer. I might act confident with this, I’m going to regret saying this, but I have no idea what’s coming, right? But just having a plan made both of us feel so much better. And then now hundreds of thousands of other people feel better because I had a plan, who have watched this video now

Brandon:
Because it’s more important to have a plan than to have the perfect plan, right? Just to like, okay, now I feel like I’m good. If we have to adjust the plan later, great. At least we have something we can adjust. But if you’re just out there like, I don’t know what’s going on? Yes. I love that you said that, Chris. Good stuff, man.

Chris:
All right. Mike.

Mike:
All right, my turn. I got some things. It’s awesome stuff there, Chris. And same as you, Brandon, and I know you’re getting ready to wrap it up. I’ve just had a blast on here. You guys are awesome and sharp, and everybody listening to all these guys here, this is what it takes, okay?

Mike:
But a couple of things I just jotted down, and I would say I want you to budget education just like you do insurance or property taxes or anything else. I’m still learning every day and I have education in my budget for what I want to learn more about. And I’m sure each of you guys do that too. So make that part of your budget.

Mike:
And then goals, okay? You got to listen to BiggerPockets, like you’re doing right now. And that’s a very important part of your education. And this stuff works. And I’m going to just change a little bit differently with what Chris said. I mean, he hit a bullseye. Failing to plan is planning to fail. And so of course I have a staff, I know Chris has a staff, and you guys. Dave’s probably on his own. But I have a meeting every week with my staff at 12 noon on Mondays to review what happened last week and so everybody’s on the same page as we move forward of not only what’s coming up this week, but coming up in the future.

Mike:
And I would say this one, I liked this, avoid bad advice, especially from poor people. And I know everyone’s going to agree with him, but how many times has somebody said, well my uncle, who said he had a rental house, he told me blah, blah, blah, blah, blah. Well, is that really who you want to… Look at the noise, look at that head that that noise is coming out of. Do you admire that? Is that what you want to be when you grow up? No. Okay?

Mike:
And Brandon said this, basically, prepare for the worst, hope for the best. And if you combine all of those things, I got a book I want you to read if you haven’t, ‘Who Moved My Cheese?’ That’s what we’re in right now. A little 10 minute book. You can read it real fast. That thing is awesome. And it’ll help give you some insight about what’s going on right now in our world and everything in America. Well in fact, the world, with all this Corona stuff.

Brandon:
I love that you said that book because that that is exactly what’s going on right now. The entire world’s cheese was just moved. That book is such a perfect analogy for what’s going on. Yeah, I’m a fan of it.

Mike:
Yeah. And it’s a fast, easy read.

Brandon:
It is, yeah.

Mike:
And if you don’t like reading well then get the audio version and play it on your phone, on your nightstand next to your bed, and you get it through osmosis. So education, failing to plan, goals.

Mike:
You got to set goals in addition to planning. In addition to planning, you got to set some goals. So you’ve got to take a financial snapshot of where you’re at now along with your lifestyle and everything else, and then do a financial snapshot of where you want to be in three to five years. And now you’ve got a point A and you got a point B. The shortest way to get from point A to point B is draw a straight line, and now you know what you got to do. And just put some mile markers on there, measure yourself, hold yourself accountable. And if you’re not good at that, get somebody on here that will. I’m sure Dave or Brandon or Dave or Chris, anybody. Have a private, confidential accountability partner to help you achieve your goals of what you want to do.

Mike:
Who was it? Dave Pepplemeyer. He’s on the board of a real estate investor group. Join one of those. You’re going to get local updates on what’s going on in your town, whether it’s fair housing laws, everything like that. And that affects everything in our real estate industry. So I’ll shut up. I’m done. Thank you, Brandon and Dave.

Brandon:
That’s good, man. All right, Dave. What do you got? Final advice for those listening.

Dave:
Well, so once again, kind of coming out of the newer investor, once again, with eight houses and adding more, I guess the biggest thing that I did in the early, early days was like Mike said, it’s just learn. I mean, you’re not going to know everything. We were talking before the call started, this is a shameless plug for Mike again, I’m with Brandon, Mike’s landlording system was the first major purchase I made. And at the time it was like, oh my God, I’m sliding this credit card for how much? But you know what? You need a system. And so that has helped me tremendously.

Dave:
Read the books. I’m sure on BiggerPockets we have lists of resources and suggestions. Asking the forums. It’s like, hey, I just bought my first house, now what? What should I read now? And it is. It’s all mindset. Luckily I’ve had some pretty good mentors in my life and in my past too, not just in real estate but other, financial, friends, family, things like that. On the good side, I’ve had people say, oh my God, you’re investing? Well actually as a physical therapist, I’ve actually dropped down from a full time PT to a part time PT in the last six months so I could focus more time on my rentals.

Dave:
And so my wife’s a realtor and so she was doing all the day to day stuff with tenants and with trying to do her real estate stuff as well as to be a mom of three kids. And it’s like, you know what? Something’s got to change. And so I made the jump down to part time, but even though we have less W2 money coming in, I am loving life so much more. I mean, this is fun. And really, I mean, if this isn’t kind of fun to you, if you didn’t like playing Monopoly when you were a kid, then it might be a little harder.

Dave:
But even through this big old hiccup here, I internally, I feel all right because I know that we’ve learned the business the right way. We have our systems in place. My wife and I have had a conversation of, well, what if one, two, three houses, stop paying? Okay, we’ll still break even now. At this point, it’s okay. I’m not going to be making millions of dollars right now, but setting a foundation for a pretty decent income that I can either pass onto my kids or just let it ride, and I’m happy with that. So just keep going. It’s weird right now, but if you’re not going to buy something, yes, learn. Buy the books, read the articles. Just feed your brain.

Brandon:
That’s awesome, man. David, let’s close it up with you. What’s your final advice for people listening right now?

David:
I think one obvious piece has been, reserves matter, right? One of the ways that I didn’t mention, I think this is going to change, is there’s been a lot of, I’m not sure if I’m going to invest in real estate, but it kind of seems cool, so I’m going to do it because it’s cool. This is going to shake some of those people out, because now they get a taste of the fear that the experienced people actually have to live with. It’s not just cool all the time. There’s actually, it can be scary too. So that’s one way.

David:
And the advice that I would give to people is, we talk about looking for an opportunity that has a barrier to entry. You want to get involved in things that are hard to get into. And when you’re just accepting that right off the bat, you don’t worry when this happens. I’ve never, for one second thought, oh my God, why did I invest in real estate when this whole scare came?

David:
And throughout a lot of this, we still don’t know how it’s going to go, but the initial the world is ending, the sky is falling, what is going on, has turned into a difference, and I think most of these guys said between like eight and 11% of tenants not paying their full rent. It’s not a huge… I think one of them was even at like 4% different, Chris said, between this year and last year.

David:
And there could be things that do completely shake it up and they do make it different. But overall, if you’re living beneath your means, if you’re smart with your money, if you’re making good, sound investments, if you’re buying properties in good areas, if you’re buying good properties, if they’re cash flowing, you don’t really need to worry about a whole lot.

David:
So when this happens, I just go right back to the fundamentals. Was I starting to get a little sloppy with the fundamentals that I was following? This will help me tighten it right back up again. The people who end up getting hurt are going to be the sloppy ones. And so that’s the only advice that I would give is just, this should not catch you off guard. This should not freak you out. You should not panic. If you had your emotions affected that much by, “what if people stop paying rent for a little while?” You probably didn’t understand real estate investing in the first place.

Brandon:
All right. All right. My quick advice is, workout every day. It’s too easy to get home, get no exercise in whatsoever, and you start feeling more and more down and you start scrolling Facebook. You get a bunch of really, really just negative stuff coming all day, a bunch of fake news. And pretty soon you’re not doing anything with your life. So get up, get some blood pumping, get your workout in.

David:
What are you doing for workouts right now, Brandon?

Brandon:
I do different stuff everyday. Pretty much every day. Kettlebell this morning. Ryan’s trying to get me into kettlebell workout, so I don’t know. That’s my thing. What about you? Lifting cows?

David:
Climb on roofs. I change it myself and I pat myself on the back in front of as many people as I can. That’s what I do. Carrying tar up and down a ladder in the hot Hawaiian sun.

Brandon:
That’s what you do. That’s what you do. All right. I’m glad that’s what you’re doing.

David:
No, what I really am doing is super simple. Everybody can do it. You watch TV and when there’s a commercial, you do an exercise. You can do air squats, you can do pushups, you can do leg raises, you can do sit ups, not that much. But if you just do that for like a couple hours in a row, you will have gotten a workout and it won’t feel like a workout, you’re not going to have to carve out an hour of time and kill yourself. Keeps the blood flowing and keeps you in a good mood because it’s easy to get into a bad funk when you’re just sitting home all day. Or go change the roof when there’s nothing else.

Brandon:
There you go. You got to find a way to feel like a man. Or a woman. All right. With that, where can people connect with each one of you? Let’s start with Dave Pepplemeyer. Did I say that right? Close?

Dave:
Yeah, we’ll go with that.

Brandon:
I get it sometimes. Where do people connect with you? Where do they learn more about you and find out about you?

Dave:
I’m on BiggerPockets. My business is D3L properties. So the email is [email protected]. And so, yeah, I definitely need to start hopping on BiggerPockets more, but yeah, if you’re a new person starting out and you want someone who’s still close to that point, absolutely, give me a call or whatever and we’ll go over things. Absolutely.

Brandon:
Cool man. All right, Chris?

Chris:
Yeah, you can reach me at reination.com. That’s the new web address of our company. There’s a lot of information on there. You can learn about us and you can learn about me in particular. But also, I try and stay pretty active on BiggerPockets. I get sidetracked, but I am still fairly active there on the site. So Chris Clothier on BiggerPockets. You can send me a message in the BiggerPockets. I think I try and get back to everybody that messages me there. Yeah, those are probably the two simplest ways to find me. I’m pretty active in both locations.

Brandon:
All right, and Mr. Mike Butler. What about your-

Mike:
Butler.com. It’s real easy. Mikebutler.com, and just click on the contact us and you can get ahold of me there.

Brandon:
Very, very cool.

Mike:
Reination, I like that.

Brandon:
Yeah. That’s cool, Chris.

Chris:
It’s kind of catchy.

Brandon:
Memphisinvest to reination?

Chris:
Yeah. Memphisinvest to reination.

Mike:
Just one last thing, just one line. Always try to take your killer deals and put them into your self directed Roth IRA for tax free profit and income for life.

Brandon:
Whoa, we can do a whole show just on that.

Chris:
Yeah, let’s… Are we [crosstalk 01:32:08] now?

David:
That’s a nice teaser. Stay tuned next week to learn how you…

Brandon:
All right, guys. This has been fantastic. Thank you guys for joining us today. Really, really good stuff. I mean, I look up to all three of you guys quite a bit when it comes to this landlording thing, so thank you for sharing your thoughts. You guys take care.

Chris:
Yeah, thank you.

Dave:
Thanks guys.

Mike:
Thank you.

Brandon:
All right, David. You want-

Mike:
Stay safe?

Brandon:
Mr. Green, you want to take us out?

David:
This is David, for Brandon, not as condescending as David Green Turner, signing off.

Speaker 4:
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Brandon:
Hey, BiggerPockets nation, it’s Brandon Turner, author of ‘The Book on Rental Property Investing’, landlord with over 500 rental units, and host of the BiggerPockets podcast. This is a troubling time, full of uncertainty in the world, right? However, some things are really certain, and one of those things is that a lot of people are not able to work due to the social distancing we’re engaged in right now. And as a landlord, many of these unemployed workers are renting from us. So as landlords, what do we do?

Brandon:
Of course now, if you’re not a landlord and you’re watching this, you’re probably wondering what’s the big deal? Just do the nice thing and don’t make anyone pay rent for a while. But we know that that is not necessarily possible, right? I mean, unless the government changes something drastically, we aren’t going to just suddenly be able to stop paying our mortgage payment. We’re not going to stop paying our taxes, the insurance and the other expenses that are needed to run a property. And despite what the general population thinks, most landlords are not rich, greedy, multinational corporations with billions sitting in the bank. Most landlords are people just like you and me. People who, whether by accident or on purpose ended up with a few rental properties and are trying to manage them while also working a job or running a business and most will not be able to pay the bills on their properties longterm without getting rent from our tenant.

Brandon:
So what do we do? Well, I can’t answer for you necessarily as we all have unique situations, but at least I can share with you the exact strategy that my wife and I have come up with for our personal rental properties. And hey, do me a favor. If you find this video helpful, don’t forget to click that little thumbs up button so that more property owners will get this information. All right, so here is our five point plan for dealing with late or missing rent.

Brandon:
Number one, have a plan. It’s kind of a summary point here, but it needs to be made. Whether in the wild West or while dealing with a tenant, shooting from the hip is generally a terrible idea. Making decisions on the fly usually results in bad decisions being made. So step one is to commit to having a plan written down for how you are going to deal with this issue. Because for most property owners, this is not a question of if, it’s a matter of when. Now, maybe this video itself can become a plan that you follow, but even if you do something entirely different from what I’m about to say, just be sure you are prepared. This way you won’t be shooting from the hip when that dreaded phone call comes in from the tenant who just lost their job.

Brandon:
All right, step number two, empathize. Now the remainder of the steps on this video, three, four, and five, they’re more concrete, but I want to make sure we address this. Tenants are people and they’re going through a remarkably scary time. Perhaps maybe a worse time you’re going through because you’re probably a little more financially educated and have more of a foundation of finance than many of your tenants do. But before anything else, listen to them. Understand what they’re going through. Talk with them. Empathize. We’re all in this together, so let’s remember to be human and keep people before profit in our discussions.

Brandon:
Now that said, we still need rent. We can’t survive financially without it. So that brings me to step number three. Step three, explain that rent is still due. For as long as there’ve been tenants and landlords and bills to be paid, there’s a super interesting piece of human behavior at play here. People will pay the bills that give them the greatest consequence of not paying. In other words, most people financially struggle to pay their bills, but they can pay some of their bills if not all their bills. This is why late fees are so important when landlording, because when the choice is between paying rent and buying a flat screen TV, well, the late fee and the threat of eviction tips the scale towards that money being used to pay rent. But today we’re not really dealing with flat screen TVs, are we? The principle still applies. Likely your tenant is going to have to make some serious decisions on what bills get paid and which ones don’t. That is why after talking with a tenant and empathizing with them, I believe it’s still important to let them know the rent is still due.

Brandon:
And as I’m sure you’ve heard, evictions are being suspended in most areas of the US right now. The ability to issue a late fee might also be banned soon. Your tenant very well might assume that this means the need to pay rent is also being suspended. And it’s your job to inform them otherwise. Even if you can’t evict right now, legally, it doesn’t mean that they still don’t owe the rent. It doesn’t mean that you won’t evict later when the courts do open back up again. You don’t need to be a jerk about this, but let them know that you have a mortgage payment, you have bills to pay, and that them paying is going to be vital for keeping the property.

Brandon:
All right, step number four, give your tenant their options. Well, once you’ve explained that the rent is still due, now is the time to help the tenant navigate this difficult time. You’ll be planning to do this by giving them their options as they may be unaware of the different ways that they could come up with the rent.

Brandon:
First, we plan to keep an eye on programs that the government is designing to help individuals, especially tenants. This is a rapidly changing time, so we’re going to keep a close eye on the assistance programs. Now right now there is a very real possibility that the government is going to issue cash payments to every adult American and that could help quite a bit. But even if they don’t, there might be local programs, state programs, or other federal programs that could help.

Brandon:
Also we are going to offer other suggestions as well. For example, maybe they could borrow money from a relative, or maybe could the rent be paid via credit card? In fact, to help where we can, we’ve planned to offer to pay the fee associated with using a credit card. And that can be up to 30, 40, 50 dollars. Now would be a good time for you to get set up on a rent collection system that has the ability to take a credit card. Companies like Venmo, PayPal can handle that, as well as property management software like Buildium, AppFolio or Cozy.

Brandon:
All right, step number five, the emergency rent deferral plan. Okay, this is where I hope my tenants don’t watch this video because I don’t really want the tenant knowing that this is an option yet. If I brought this up at the beginning for tenants, most everyone in the world would jump at it, because remember, humans will naturally pay the most pressing bill. So I need them to know that rent is still incredibly, incredibly high on their priority list. So step five though is our worst case measure that’ll only be mentioned to tenants when they don’t pay their rent. Not when they call and say they’re not sure they’ll be able to. We’ll still let the tenant know that the rent is due on the first, we’ll give them their options I just mentioned, and even still issue a late notice to the tenant if they miss paying rent.

Brandon:
But what if they really have exhausted all their options and they just can’t pay the rent and they’re a good tenant, especially if they’re a good tenant. This is where we will introduce the tenant to our emergency rent deferral plan or ERDP. And because we followed step one of the video, we have a specific plan in place to deal with this inevitable situation. And having this documented plan in place shows the tenant that this is not us winging it, but we have a system that can handle this, we’re professional.

Brandon:
But more on that system in just a second. First, there’s a really important question we’re going to ask each tenant before we introduce this plan. How much can you pay toward your rent? Chances are even if they can’t pay all of their rent, they can probably pay some of their rent. Maybe their rent is a thousand dollars a month and they can pay 300 toward their rent. Well, we’re going to accept that 300 and move on to the ERDP.

Brandon:
Now, what is ERDP? Simply put, the ERDP allows the tenant to opt into a payment plan for their rent over the following 10 months. The ERDP is an addendum to their lease that gives them the ability to take their rent and pay it in equal portions for the next 10 months. Now that begins the second month after enacting. It basically gives them an extra month before the increased payment begins. So for example, let’s say that we’ve gone through all of this, but the tenants simply cannot make the April 1st rent. They owe a thousand dollars in rent. And because we asked what they can put toward it, they are able to put $300 towards the remaining total they owe. So the remaining $700 becomes 70 bucks a month and that gets added to their rent beginning June 1st. So starting June 1st now, not May 1st, and I’ll explain why in a second. They will pay $1,070 per month in rent until the following March.

Brandon:
Now why not start the payment next month? Simply because I have a strong suspicion that this is not going to end quickly. One month deferral may not be enough time to get them back on their feet. So we’re going to wait an extra month before adding that extra payment. Now furthermore, it is our company policy that during this time a tenant will be allowed to use this ERDP twice. Of course, we aren’t going to tell them that immediately the same reason we’re not going to tell them what the program to begin with. We want them to work through steps one through four first. Rent has to remain a priority, but eventually we will let them do two months.

Brandon:
Now, if after those two months they’re still unable to pay, the tenant may just need to move. Now, this is completely uncharted territory we find ourselves in today. I’m not going to lie to you and tell you I know exactly what we’re going to do then and I know what the future holds. But here’s the deal. The government can’t forever stop evictions and stop making people pay rent or allow them not to pay rent, but continue to force mortgage payments and foreclosures. I mean, otherwise every landlord in the country is eventually going to go bankrupt or all these banks are going to end up owning millions of properties. So somewhere, something’s going to have to give. If this social distancing, job loss and potential economic meltdown continues, we’re going to make new rules as it happens.

Brandon:
My guess is that the government will offer more and more programs to attempt to help because remember, you and I are not alone in this. Everyone is trying to figure this out. And we will. Humans have an incredible ability to figure stuff out when the night is darkest. We will get through this. We will survive. We will emerge stronger.

Brandon:
Now, I hope this video shed some light on what I’ll be doing in my personal rental portfolio to handle potential rent issues in the near future. Maybe you’ll be doing something a little bit different and hey, that’s great. We’re all just figuring this out. I encourage you to share your thoughts below the video and let us know what your plan is. And perhaps together we can help the world, both tenant and landlord move forward, financially successful.

Brandon:
Remember, if this video was helpful please hit that like button below the video, a thumbs up, and share this with somebody you think would benefit from hearing it. And if you’re a landlord and you’re looking for more advice on managing rental properties, my wife and I wrote a book called, ‘The Book on Managing Rental Properties.’ It’s full of tactics, tools, and strategies for navigating the messy world of landlording. You can even get out of library, so if you don’t want to buy it, just read it.

Brandon:
And perhaps now is a good time to get some reading in, anyway, to brush up on your skills. Because remember, the economy cannot stop your work ethic. It can not stop your drive. It can not stop your quest for self-education, self-improvement, and personal growth. For biggerpockets.com, my name is Brandon Turner, signing off.