Landlord Tips: When the Township becomes the Tyrant…

The Way It Was
Years ago it seemed that investing in residential real estate was much easier. For one, the township was more of a friend than a foe.  I’ve been investing in 1-4 family rentals for over 25 years and for the first 10 years they seemed to be a lot more cooperative.

If I needed to do a renovation or repairs between tenants it seemed like after I did the first one we built enough of a relationship that they became much easier to deal with.  If I had a problem with a tenant concerning criminal or health problems, you could actually call on them to assist you on solving the problem.

Today, that has all changed.  I recently called the township about an abandoned car in an alley behind my property and guess what?  They started to fine me.  Once, I had a drug bust by the DEA at a property and the township boarded up the front entrance and didn’t even call me.  I just happened to be driving by and saw the plywood.  Then I got a nice bill in the mail from the township.

A Brief Case Study

Roughly 10 years ago I had 8 properties in a town about 20 minutes southwest of Philadelphia (out of decency I’ll leave the town nameless but honestly it could be a multitude of towns in the region because I know firsthand this problem goes on there and have heard stories about it happening all over the country). I bought many properties and recommended others to buy there as well because it was so cheap to buy and the average rents were so high. Not to mention taxes were cheap, and it was a good school district. It was a no brainer. In about 5 years, the township started it’s “cracking down” of sorts on landlords with unnecessary fees and bills. The biggest challenge is usually the rental licenses.  For the most part, it’s a plain old money grab.  Some towns take the fees and don’t even inspect.  Some inspect every time a tenant moves out and once a year too.   Many have exorbitant re-inspection fees as well, even as high as $75. How is it I can have initial inspection fees vary from $25-$250 per building, per year?  It’s not hard to drum up a few repairs that will require a permit and licensing fees from the contractors, followed by a nice re-inspection fee. I’ve fought the township an innumerable amount of times it feels like, but it is sadly a case of “you can’t fight city hall.” I now only own 3 properties in this once landlord friendly town.

Why?

Why has this happened? I can’t find any specific examples in the media for an explanation, perhaps landlords aren’t vocal enough or perhaps there isn’t anyone there to listen (the typical response from Joe Homeowner would probably be, “so what? You’re a landlord. You can afford it”) but here’s my theory. Town budgets, I know for a fact in the towns I am referring to in this article, have gradually gotten tighter and tighter over the years and they have started looking for a means to create revenue. The landlord is an ideal source of revenue for the township; they’re someone you can fee, they’re someone who has to pay, and they’re someone who doesn’t vote in your town. It’s basically taxation without representation. Landlords generally don’t live where they rent because they can’t live everywhere. So it looks like we have a new business partner in our real estate investing game and he looks like he’s here to stay.

Moving On

This has been the one of the primary reasons I’ve shifted my real estate investing into notes and mortgages over the last 5 years.  Not only do I avoid tenants and toilets, I get to miss the townships too. Until legislation changes, if that’s possible, I’m done with the SFR investing game. It was a great launching board for the note business and now I can manage thousands of more notes than I could properties, they’re cheaper in both time and money, and I’ve finally rid myself of all the aggravation.