All Forum Posts by: Al D.

At this point, I cannot personally recommend anyone there. But: I purchased from Alliance Wealth Builders last year. As part of the purchase, I ended up using their sister company REI. I would absolutely not recommend REI. I am still going through the motions with them, but the experience has been terrible. And I am not inexperienced. PM me if you need specifics. Also, if anyone has had issues with REI, I'd love to chat with that person.

Update: I recently learned that, before I fired the PM firm (effective mid-April,) the tenant was also late on her February and April rent. I think the tenant caught up within just days on those - I do not think that the PM firm issued default notices in those months. The tenant finally paid for July in early August - and, according to a statement from the PM to me, expects to pay for August and September in September. The PM firm issued another Notice to the tenant in August. The PM firm also issued the tenant a $500 fine for an undeclared pet in August. In my calculation, since becoming my tenant on January 30th of this year, this tenant breached - and cured - the lease 5 times. She is currently in breach for the August rent and the pet. That is 7 breaches in 7 months. The PM is totally ok with this situation - no money out of its pocket under "rent guarantee" to me. (Again, after the PM and I signed a Letter of Understanding in May - when the PM was convinced into it by a third party - the PM only "covers" me until the end of this lease, which is 12/31/17.) Among other things, our LOU also states: "[PM Firm] agrees to remove the current tenant by whatever legal means necessary as soon as possible... [PM Firm] will perform this Item at no cost to Alex." I want this tenant out while I still have the PM firm's "coverage." I made this clear to the PM firm, yet again. Their response: "Facts are the courts will not evict until the tenant is one month late and well into the second month. Like the 25th of the second month..." This response flies in the face of how (quickly) the PM firm dealt with the first tenant they evicted last year. And, more importantly, it is in huge contradiction to their statements to potential investors in their turnkeys during investor presentations - they tell you how easy it is to evict, and how quickly they start the process. @Denise Evans, any truth to the need for tenant to first be roughly 50 days behind before starting the eviction process, which is what I asked the PM firm to do now? Mind you, I asked to have the tenant evicted under the 4 cured breaches law. Before this even goes to court, steps must be taken - process must be initiated. "Initiated" being the key word. The PM firm's CEO I've been dealing with worded his response cleverly. I do not trust him, if I had not made that clear. Thank you.

We have experienced government workers giving concessions to their employers in California. In some cases, there was no choice, as cities actually went through bankruptcies. In no case, as far as I know, did any employee lose everything. I know some guys who decided to retire before their benefits-eligibility date (like age 50) just so that they could "freeze" the original benefit before the new rules kicked in. The left their pensions untouched - each was vested. These guys then got jobs in the private sector or another city/county with a different retirement system - they could see what was coming before it hit. I think that some of those massive concessions have recently been overturned by courts - California is doing somewhat better financially, too. I hear that, besides Puerto Rico, Illinois has the largest pension underfunding in the US. So, an argument can be made that your money (money that you have put into the system and can therefore take out before your retirement date - and forfeit the retirement benefit) should be taken out and invested elsewhere, anywhere safer than the State of Illinois. But, even in the worst case of concessions imaginable, would you really do better on your own in real estate than if you let it ride in the defined-benefit system that will pay you until the day you die, and may even pay your surviving spouse beyond that - figure out your likely longevity. Talk to your union leaders about what the worst case of concessions may be before you make up your mind on pulling out the money. We all need firefighters. City leaders - and taxpayers - get it. I don't think your job can be automated that soon.

Btw, I am presuming that your "pension" is not a "defined-benefit" account, like, say, in many government agencies. If it is, and you have no reason to fear for its long-term safety (which I understand is a big question in Illinois,) I wouldn't cash out - a guaranteed monthly check sometime in the future is better than a gamble, even on real estate. Instead, find other cash to invest with. Defined-benefit accounts are a dying breed - majority of the risk is on the employer/taxpayer (depending on who the employer is.) However, if your "pension" account is "defined-contribution" - majority of 401/403/457s are - it's a fair game to roll it over into a self-directed account to invest in real estate.

Unless your pension account is already invested in an asset that the IRS considers "1031-exchangeable," you cannot do a 1031 exchange at this point (https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031.) What you can do is a rollover (https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions) from your employer's retirement account into another retirement account, including a self-directed one. Only from a self-directed account can you then invest in a real property as an investment. Then, once there is appreciation in that property, you can sell it and invest the proceeds into a like-kind investment - but, there is no need to do that as part of a 1031 exchange because your retirement account is already a tax-deferred account. The whole purpose of 1031 is to defer paying taxes either until you no longer want to be an investor and sell the asset, or until your descendants (who would inherit your investment real estate at whatever value it may be on the date of your death - best case scenario, if you love your descendants, that is) decide to cash out. A Roth account is somewhat similar when it comes to these tax benefits. About the only time a 1031 exchange within a tax-deferred account makes sense is if you borrowed money to purchase the asset in the first place (too complicated for me to understand for myself and explain here - but that's the only benefit of a double-tax-deferred transaction that I recall ever hearing about.)

Thank you, @ Denise Evans.

All fair points, @Denise Evans.  Thank you.

From the actual lease agreement entered onto between this PM firm and this tenant: "... If the rent is unpaid when due, and the Tenant fails to pay the rent within five (5) days from the Due Date, the Landlord may deliver a written notice to terminate the lease to the Tenant specifying the amount of rent and any late fees owed to remedy the breach and that the Rental Agreement will terminate if such breach is not rememdied within seven (7) days after receipt of the notice."

Thus, in my understanding:

1.  The very lease agreement that the PM firm uses refers to rent not paid "within five (5) days from the Due Date" as a "breach."

2.  The law I cited allows for four cured breaches in a 12-month period before an eviction can be sought.

3.  The PM firm sends out notices titled "Termination Notice," which appear to be in compliance with the above-quote part of the lease agreement.

4.  Notwithstanding the PM firm's own wording of the lease agreement and what the letter of the Alabama law appears to be, the PM firm still tells me that it's not a breach "as long as she pays in the same month it's due."

My original question stands.

Dear Abby (a licensed Alabama RE agent/broker, RE attorney, experienced property manager - sorry, no offense to anyone else, but I need just the facts from this post, not guesses.)

First, the law as it is written:

Section 35-9A-421

Noncompliance with rental agreement; failure to pay rent.

(a) Except as provided in this chapter, if there is a material noncompliance by the tenant with the rental agreement, an intentional misrepresentation of a material fact in a rental agreement or application, or a noncompliance with Section 35-9A-301 materially affecting health and safety, the landlord may deliver a written notice to terminate the lease to the tenant specifying the acts and omissions constituting the breach and that the rental agreement will terminate upon a date not less than seven days after receipt of the notice. An intentional misrepresentation of a material fact in a rental agreement or application may not be remedied or cured. If the breach is not remedied within the seven days after receipt of the notice to terminate the lease, the rental agreement shall terminate on the date provided in the notice to terminate the lease unless the tenant adequately remedies the breach before the date specified in the notice, in which case the rental agreement shall not terminate.

(b) If rent is unpaid when due, the landlord may deliver a written notice to terminate the lease to the tenant specifying the amount of rent and any late fees owed to remedy the breach and that the rental agreement will terminate upon a date not less than seven days after receipt of the notice. If the breach is not remedied within the seven days, the rental agreement shall terminate. If a noncompliance of rental agreement occurs under both subsection (a) and this subsection, the seven-day notice period to terminate the lease for nonpayment of rent in this subsection shall govern.

(c) Except as provided in this chapter, a landlord may recover actual damages and reasonable attorney fees and obtain injunctive relief for noncompliance by the tenant with the rental agreement or Section 35-9A-301.

(d) Notwithstanding Section 35-9A-141, no breach of any of the terms or obligations of the lease may be cured by a tenant more than four times in any 12-month period except by the express written consent of the landlord... (there is more, but it is not related to my question.)

Second, the situation:

I own an SFR in Calera, Shelby County. I was using a local PM firm (name not important.) Based on purchase agreement, the PM firm was responsible for paying me rent for 12 months following my purchase of the property from them - whether the property was rented or not. That guarantee was to expire in May of this year. The original tenant I inherited as part of my purchase had to be evicted just months later for non-payment of rent. The PM firm placed a "replacement" tenant in the property in January of 2017, following four months of the house sitting empty. The PM firm paid me rent, as agreed.

However, due to a number of issues I still had with the PM firm, I terminated my contract with the firm, effective in April of this year.  It was at that time, that the PM firm provided me with the current/"replacement" tenant's original application, which showed that the tenant should not have qualified to rent the property, if for no other reason than that she did not even have income 2x the monthly rent - far cry from the PM firm's advertised "3x minimum," as well as other "minimum" requirements.

The very next month, May, the tenant failed to pay rent, and failed to respond to any communication attempts for days after.  The lease agreement has the due date on the 1st of each month, late if payment is not received by the end of the 5th day.  (I had established a line of communication with the tenant in April, had her sign an addendum about where to make future payments, whom to contact, etc.)  The tenant only resurfaced after I had the house served by a process server with a 7-day notice.  She claimed to have lost her job.

The PM firm - after external "pressure" - agreed to extend their original rent guarantee to me through December (when the current lease would expire,) and to get the tenant evicted at their cost, as soon as legally possible, as well as to find another tenant at no cost to me.  All good.  Couldn't ask for more.

The tenant ended up paying in late May.  She again did not pay on time in June.  The PM firm sent her "Termination Notice" to pay by regular mail and email.  The tenant caught up by late June.  She was late again in July, and another Termination Notice was sent to her.  I am not sure whether she's paid for July yet; she had not paid by at least the middle of the month.  In any case, she appears to not be paying the ever-growing late fee since May.

Since I would like to have this tenant evicted as soon as possible, so as not to have to still deal with her late payments and potential eviction and other costs to myself come next January - when my rent guarantee is over - I inquired of the PM firm whether they are documenting each "breach" (subsection "(b)") in order to be able to evict the tenant after her fourth breach since this May (per subsection "(d)".)

And the Question:

The PM firm told me that it is not considered a breach, "as long as she pays in the same month it's due."

I am not a lawyer in any state, but have over twenty years of experience in reading and applying laws.  This is simply not how I understand the statute.

Dear Abby, I know that I am probably just feeling insecure about myself after this otherwise-trustworthy PM firm sold me this bill of goods and then agreed to remedy the situation after only a few arm twists by people stronger than me.  But could they be wrong in their interpretation of the law?  After all, this status quo does benefit them.  And the last time something benefited them over their fiduciary duty to me, they chose themselves.  But maybe they've changed, and I need to learn to trust again.

Perhaps, dear Abby, Shelby County eviction judges have been known to see the law the way the PM firm sees it - I trust that you would know and could tell me that.  I could just be wrong.

The flip side of this situation - if I am not wrong about the law - is that each month after the fourth breach the PM firm does not seek an eviction, once I take over again and do seek an eviction under subsection (d), the judge may not see the urgency in my claim.

With bated breath.

Thank you, Abby.