Bad landlord from my past has me reconsidering RE investing

General Landlording & Rental Properties
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Bad landlord from my past has me reconsidering RE investing

Jennifer Hamon
Cambridge, MA · Member since 2019 · 7 posts · 1 vote

For the last 6 weeks or so I've been studying RE investing intensely and trying to settle on my medium term strategy. I have about a year before I'm in a strong financial position to buy my first property and I want to be ready when the right opportunity presents itself. RE excites me because it seems like there's a lot of rewards available for those who are good at analyzing the numbers and thinking creatively.

So today I came home and opened my mail to find a demand letter from the real estate company I rented from back in 2015. It alleges an unpaid balance of $200 (no details about what this charge actually is for) and says if I do not pay within 10 days they will report the delinquency to credit reporting agencies and turn the debt over to collections. I feel blindsided as this is the first communication I have received about this matter; I always pay early or on time and they even returned my deposit after I concluded an 18 month tenancy in 2016. My partner called the leasing office while I was at work and confirmed the letter is not a scam but they did not provide detailed information about the charges over the phone.

The building is owned and managed by Tod Speiker who has built an empire by buying up all the B and C class units in Silicon Valley, evicting long-term residents, putting in a couple stainless appliances and jacking up rents 50% or more while providing basically no service to tenants on issues of pest control, in-unit maintenance, noise, etc. I paid $2100/month for a 500 square ft unit that, despite the shiny appliances, was overrun with german cockroaches that the management refused to acknowledge. This is a very profitable way to operate in the context of the Bay Area where there is a severe housing shortage and people have few alternatives. You can read a puff piece about this dude's company here: http://www.siliconvalleymultifamily.com/wp-content/uploads/2015/09/Tod-Spieker-Profile.pdf

The $200 is no big deal for me, but the prospect of having a bogus delinquency from this scammy property management company show up on my credit report right as I'm gearing up to buy into this game is conjuring a lot of negative emotions. On the one hand there is fear, helplessness, and anger -- because if this doesn't get resolved correctly how will it impact my ability to get good financing terms next year? But beyond that, really it's making me feel shame that I wanted to get into this landlord business at all. 2000+ multifamily units is what success looks like in real estate, but I don't want to make my fortune by stepping on little people like this guy.

Right now I'm thinking about the hundreds of tenants that got kicked out of their homes so Mr. Speiker could quickly ratchet up his NOI. I'm thinking about how I would feel if I were the kind of person for whom an unexpected $200 charge represented an existential financial crisis.

Do any of you ever struggle with the morality of landlording? Does it impact your sense of self-worth in a negative way?

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Robert C.
Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes
7y

@Jennifer Hamon, Full disclaimer: I do know of Tod Spieker (I've seen him speak) and he is kind of a local legend around here having built such a large portfolio. It's unfortunate that you're being haunted like this, and I'm not totally surprised. I do think many of the property management companies around here lose sight of the customer service aspect of the business. 

Here are some of my thoughts:

1.) The simple answer is to run your business differently - there's nothing wrong with that. No need to chase down your tenants for a couple hundred dollars if you can afford to let it pass. 

2.) On the tough love side of things - if this $200 thing affects you so deeply, I'm not sure how you will react when a tenant does something that costs you that amount or more. Tenants can be pretty irresponsible and vindictive as well, and can cause mental anguish, too - you will always remember the bad ones!

3.) The fact that you're asking the morality question means that tough decisions will be unavoidable unless you have enough money to not to care about the money. And if that's the case, you're not really being that good an investor. You will at some point have to raise rents, or evict someone, or deal with somebody who is not happy with you or asks for something that you are not willing to give. 

I can't answer the self-worth thing for you, but I can tell you that if you self-manage, then landlord-ing is a very "up close and personal" business. That means that you might feel like a turd some days because you had to get your hands dirty, but then there are other days when you know you did a little something to help a good person out. Hopefully, there is much more of the latter than the former. 

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  • Brian Van Pelt
    Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
    7y

    @Jennifer Hamon

    First off, if you make your mind to do everything ethically, morally and legally right, then you will sleep well at night.
    From time to time you will find a situation where have to be tough, but it will feel bad. For example one of our rental properties that we  PM had a older tenant we had to make a decision to not renew her lease. She was having trouble paying the rent, sometimes 30 days late. The Landlords mortgage still had to be paid. It was a bad situation all around, but we had the obligation to do what was in the Landlords best interest.

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  • Account Closed
    Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes
    7y

    Don't pay the $200. The real estate company probably sold the debt to a collection agency that offered the real estate company a percent of the booty. If they report you to a credit reporting agency send a letter to the reporting agency and contest it. The collection agency may respond the first time, but when you contest it a 2nd time the collection agency most-likely will not respond and it will be removed. I would not worry about it. Probably, a secretary at the real estate company is trying to make some side cash.

    1Reply
  • Robert C.
    Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes
    7y

    @Jennifer Hamon, Full disclaimer: I do know of Tod Spieker (I've seen him speak) and he is kind of a local legend around here having built such a large portfolio. It's unfortunate that you're being haunted like this, and I'm not totally surprised. I do think many of the property management companies around here lose sight of the customer service aspect of the business. 

    Here are some of my thoughts:

    1.) The simple answer is to run your business differently - there's nothing wrong with that. No need to chase down your tenants for a couple hundred dollars if you can afford to let it pass. 

    2.) On the tough love side of things - if this $200 thing affects you so deeply, I'm not sure how you will react when a tenant does something that costs you that amount or more. Tenants can be pretty irresponsible and vindictive as well, and can cause mental anguish, too - you will always remember the bad ones!

    3.) The fact that you're asking the morality question means that tough decisions will be unavoidable unless you have enough money to not to care about the money. And if that's the case, you're not really being that good an investor. You will at some point have to raise rents, or evict someone, or deal with somebody who is not happy with you or asks for something that you are not willing to give. 

    I can't answer the self-worth thing for you, but I can tell you that if you self-manage, then landlord-ing is a very "up close and personal" business. That means that you might feel like a turd some days because you had to get your hands dirty, but then there are other days when you know you did a little something to help a good person out. Hopefully, there is much more of the latter than the former. 

    1Reply
  • Jennifer Hamon
    OP
    Cambridge, MA · Member since 2019 · 7 posts · 1 vote
    7y

    @Robert C. Thanks for your thoughts. Just to clarify, I don’t care about $200 and fully expect to suffer significant losses at some point due to bad tenants. That should be priced in to my investment plans.

    I care a lot about my credit score, as that has a direct impact on my ability to borrow and the terms I receive. I have pretty good credit and have been working to get into the excellent range by being intentional about my utilization ratio, etc, and that’s why this feels so emotional.

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  • Account Closed
    Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    7y

    Did you ever receive a bill for this $200? When you originally moved out of the unit. California and like every other state will have a law that says how long they have to send you your deposit. Did they send you back the deposit? Did they give you an itemize list of damages or things that they withheld part of the deposit form? These are all questions that I would be asking.

     Did you ever receive a bill for this $200? When you originally moved out of the unit. California and like every other state will have a law that says how long they have to send you your deposit. Did they send you back the deposit? Did they give you an itemize list of damages or things that they withheld part of the deposit form? These are all questions that I would be asking. 

     As far as the morality and ethical of you being a real estate investor that is only something that you can decide.  You will have to evict, give non-renewals of leases and enforced standards and late fees.   If this isn’t you are willing to do I suggest finding something more passive to do with your money, notes, syndications, private money lender.  

    1Reply
  • Clifford Paul
    Rental Property Investor · Member since 2018 · 483 posts · 956 votes
    7y

    I have never heard of a property manager returning a full deposit without deducting money owed. If this is the way they manage 2000 plus units it's a crappy way to  run a business.

    0Reply
  • Jennifer Hamon
    OP
    Cambridge, MA · Member since 2019 · 7 posts · 1 vote
    7y

    @Account Closed I never saw a bill of any kind. They returned our full deposit when we moved out. My best guess is that this is some utility charge that was applied to our balance after we'd already vacated and gotten our deposit back. I called twice today and couldn't get them on the phone. I plan to mail a check tomorrow and hopefully that will be the end of it, but I'm anxious because the way this came up out of nowhere leads me to believe they are pretty disorganized.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Jennifer Hamon I don’t involve emotions in my business, and I suggest you don’t either. Follow the law, be ethical and moral and you’ll be fine. Tenants will screw you. Landlords may screw you, but you can operate differently and better.

    As to your actual case, I would not pay the 200 dollars and maybe see if you can get your own attorney to sue them, as I am sure this is a violation of some law, especially in CA.

    Finally, I doubt the guy who owns the building (if he owns 2000 units) is involved in this sort of thing

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  • Account Closed
    Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    7y
    Originally posted by @Jennifer Hamon:

    @Account Closed I never saw a bill of any kind. They returned our full deposit when we moved out. My best guess is that this is some utility charge that was applied to our balance after we'd already vacated and gotten our deposit back. I called twice today and couldn't get them on the phone. I plan to mail a check tomorrow and hopefully that will be the end of it, but I'm anxious because the way this came up out of nowhere leads me to believe they are pretty disorganized.

    Sounds like they are disorganized.   I’d write something in the memo line to the effect of paid in full or final payment or satisfies account.   So when they come back in 2 more years asking for more you can show where they accepted the payment and where it states that it closed your monies owed to them.  

    As far as being a landlord, you get to chose of whether to be a good one or bad one.  Your choice.  

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  • Charlie Vess
    Investor · Colleyville, TX · Member since 2015 · 41 posts · 18 votes
    7y

    @Jennifer Hamon

    Being a Landlord of multiple properties in Texas, I have 30 days from the day of Tenant move out to submit an itemized statement along with their deposit. Once the deposit has been submitted, the file is then closed. Not knowing the laws of MA or where ever you rented, I’m a bit baffled as to why you would arbitrarily send a check for the amount requested and not know what you are paying for. If they are not answering the phone that also tells me that something is amiss. And this is REGARDLESS of who owns the property! This then forces me to send them a certified return receipt letter demanding an explanation. Now if you elect to send a check “hoping” that will resolve the matter, I can only say “good luck” because I can tell that you can probably expect more frivolous invoices. Not knowing all the details of the past, this would also NOT effect my decision to invest in real estate. If anything, it would strengthen me to learn what to n what not to do.

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