All Forum Posts by: Alexander V.

 The problem is that if a tenant has a standing lease that survives the sale, that fact is included in the sales contract. No such clause about property management is [ever] included in a sales contract. The sales contract has my name on it, therefore I am explicitly acknowledging the existence of a lease and agreeing to inherit it (or explicitly refusing to). Not so with the property management agreement.

Moreover, tenants are explicitly protected by state law in many situations that would allow them to stay even if the seller failed to disclose the existence of a standing lease to the buyer. I've never heard of a parallel for a property manager.

The issue at hand is that unlike the lease, the property management company does not have an agreement WITH ME. The agreement is a direct line between them and the previous owner. It seems questionable to me whether that agreement can just float over and stick to me when I have never signed anything or even been notified of the existence of such an agreement.

I'm not asking about what property managers write into their contracts. I've seen entire wish lists embedded into them. I realize that it is fairly common for property managers write in their contracts that the agreement survives sale. Assume that in this situation the property manager has included such a "survives sale" clause. Considering the fact that I never signed or agreed to anything and was never made aware of any obligations, does a clause claiming that the manager's rights "survive sale" have any legal grounds, or is this an unenforceable wish-list item that they throw in and hope it isn't challenged?

To be totally honest, I always felt like the 1031 was a loophole that only stayed open as long as it has because most politicians in the legislature happen to own real estate themselves. If I ever had a chance to use a 1031 (I haven't yet), I would, because I don't see anything wrong with optimizing business according to what is legal; however, I am not surprised that it is being explicitly targeted. It's an obvious loophole that can be used to never pay taxes, and we are currently seeing the number of individuals hostile to investors and businessmen dramatically increase with the newest generation of voters that seem to view themselves as some sort of neo-proletariat.

Although as mentioned by others, both Democratic and Republican members of Congress own real estate. Even if President Biden genuinely wants to follow through with this tax plan, he has to also cut through resistance in his own party who will surely realize that the death of the 1031 is going to kick them right in the profits as well.

There are "experts" in every market at any given time who will be proclaiming that a recession is imminent, and since 2008, there have been "experts" pretty much every year grasping at straws to draw contrived parallels and say another downturn "like 2008" is coming. If you search this forum or anywhere else, you will see thread after thread after thread EVERY YEAR for years saying "experts say another 2008 is coming!" Here's a couple examples I found in 2 minutes on this site:

2012: https://www.biggerpockets.com/...

"Many media outlets, respected investors and the like are reporting 2013 will be yet another recession. Possibly more severe than the one in 2008..."

2015: https://www.biggerpockets.com/...

"I was just wondering how many people... have given any though to another potential recession of if you expect to see continued growth. The extremely low cost of borrowing caused people throughout the country to overextend themselves causing the problem back then. The interest rates have now been at 0% for 7 years. This has no doubt encouraged investing, especially in the corporate sector which now has something like 2.5 trillion in high yield bonds. This is twice the amount of corporate debt back in 2008."

For the last 5 years, it's been "this bull market has been lasting too long. A recession must be imminent, how should I change my strategy, should I just wait?" No recession. Then the virus hits, "oh, this is it, a recession is imminent, it's going to be another 2008! 2020 is the apocalypse!" Real estate market thrives through the entire year of 2020 hotter than it was before. "Oh well, er, it's too hot! Yeah, that's it, it's unsustainable!"

Give me a break, nobody knows when a recession will hit, and your best preparation is to do what good investors do anyway. Buy only goods, have enough cashflow that you could drop your rent without hemorrhaging money, have some cash reserves, etc. etc. All of the cliche basic advise that you hear repeated on every podcast is the strategy to defend against a downturn. That strategy is the same as basic investing strategy. You're saving cash for in case something bad happens. You want a pad of cash flow in case something bad happens. The dozens and dozens of threads in the last decade asking "should I wait" or "how should I change my strategy" can't possibly be fruitful. No matter when you ask the question "when is the best time to invest," and "what base strategy should I use now," the answers are "now," and "the same basics that good investors use at all times." Just make sure you're buying good deals.

Have any fellow small-time investors successfully financed a small multifamily (not a cash offer) in any popular market in the last three months? If so, how long did it take you to get an offer accepted?

I have a VA loan available, and decided a few months ago that I'd like to use it to buy a small multifamily in central/southern Florida. I'm in Central Florida right now and have been actively looking and making offers trying to get rid of this tap into this VA loan since about July...

Every good deal that I see that's on the market in the Orlando metro, St. Petersburg metro, and even mid-sized cities between the big ones and on the coasts get multiple cash offers IMMEDIATELY upon hitting the market. I had my agent call one listing 12 hours after it hit the market and they already had 3 cash offers! From my angle, anyone in Florida trying to buy small multifamily basically has to make a same-day cash offer, or they have virtually no chance.

Trying to buy multi with a VA backed loan, I fully expected to be at the bottom of the totem pole, but I honestly didn't expect to be competing (futilely) with multiple cash offers on literally every deal I make an offer on right now. Is everyone in the same boat, or is this a Florida thing? Does anyone have any recommendations on how to snag a deal in this market for someone who can't offer cash, or is it just a numbers game?

Under normal circumstances, I'd think the same thing. I think that eviction in most jurisdictions typically entails removing someone who has an active lease due to their violations of the lease agreement. However, the CDC order (of course) has it's own special definition of "eviction:"

"'Evict' and 'Eviction' means any action by a landlord, owner of a residential property, or other person with a legal right to pursue eviction or a possessory action, to remove or cause the removal of a covered person from a residential property. This does not include foreclosure on a home mortgage."

I bolded and underscored the dangerous part. It basically says that any action you to take to remove any covered person from the property is currently being considered an eviction. And a covered person is "any tenant, lessee, or resident of a residential property" who meets the qualifications and gives you a notice. Nowhere does the order say that they have to have a lease. The "resident" could in theory even be a squatter and still try to appeal legally as they do in Spain.

How strongly that will be enforced and how widely it will be interpreted will probably vary be jurisdiction, but I still recommend being careful even if your tenants are on month-to-month, especially if you're in a state like WA, CA, MN, etc. that are not very friendly to landlords. There is nothing in the order explicitly stating that the person in your unit needs an active lease to gain protection.

I was thinking the same thing, what an odd and impassioned response to a simple question. I'm fully supportive of SEO, but I have to assume that the massive number of veteran wholesalers who continue to use cold calling and DMM to try to make a connection before Google gets consulted have some reason for expending all that effort. I'm just wondering if people already have the data that I could get and whether they'd want it.

I've purchased leads in a different industry before (not real estate), and they were trash. Old data, missing info... I ended up digging for my own leads, because so many that I bought were duds that it wasn't worth wasting time trying to sort the good from the bad. Any time you're the one making first contact, your conversions will be low. But it's a game of statistics, and if you can tap into a group with a relatively high conversion rate before any of your competitors, then you'll probably do relatively well. That was my train of thought... and as I said, the local real estate group I spoke to (which is the best in my city and highly professional) were the one's that said the "three D's" are the best target market for proactive wholesaling.  

To anyone who engages in wholesaling,

I spoke with a real estate group recently that knew that I work in the data field. They gave me an open offer, saying that they would be interested in hiring me to mine data on the "three D's" (death, divorce, distress) to help them find motivated sellers before other wholesalers. At the time, I didn't have any projects that could help them, and wasn't in a position to start anything new.

Recently, I believe I have an idea for some technology that I could produce in a month or two that once completed could provide a daily list of every property owner in a given state (or area) who died in the last 24 hours as well as contact information for their next of kin. Would anyone be interested in this technology? I'm not trying to sell anything (yet), but I'm trying to gauge if it's worth my time to develop. To me, it seems like an exclusive contract for such tech to get this information before anyone else in your area is a gold mine, but then again, I'm not a wholesaler.

Thanks for the input.

As many of you know, President Trump signed an executive order in August that, in addition to other tasks, required that

"The Secretary of Health and Human Services and the Director of CDC shall consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19 from one State or possession into any other State or possession."(1)

At the end of last week, the CDC concluded that an extended eviction moratorium is, indeed, reasonably necessary (in their view) to prevent the further spread, and they published an Agency Order that effectively imposes an eviction moratorium across the country for the remainder of the year. It is set to expire (theoretically...) on 31 December, 2020.

I've heard a lot of landlords either praising Trump for this or bashing him for it. There are also a lot of misconceptions about what the CDC Order actually does. Instead of making an outrage post, I wanted to make a post correcting a few misunderstandings that I saw in recent threads, and also add a few suggestions that I have so that landlords may be better able to minimize the damage caused by this order.

Misconceptions

1. The CDC Order is not particularly harsh as far as eviction moratoriums ago. Since it is country wide, it will override harsher and more restrictive moratoriums state-level and block new state-level moratoriums in the future. This EO and CDC Order is an attempt to standardize moratoriums, and will ultimately benefit landlords.

Unfortunately, this is not the case. At all. The actual verbiage of the CDC Order is as follows:

"This Order does not apply in any State, local, territorial, or tribal area with a moratorium on residential evictions that provides the same or greater level of public-health protection than the requirements listed in this Order. Nor does this order apply to American Samoa, which has reported no cases of COVID-19, until such time as cases are reported.

In accordance with 42 U.S.C. 264(e), this Order does not preclude State, local, territorial, and tribal authorities from imposing additional requirements that provide greater public-health protection and are more restrictive than the requirements in this Order."(2)

The CDC has made it clear that they want to increase restrictions, and exclusively increase them. States that have very harsh anti-landlord policies will be in no way blocked from continuing those policies, while states that previously had no eviction moratoriums now do.

2. The CDC eviction moratorium will block any attempts to evict a tenant. This will allow criminals and thugs an even greater chance to exploit the pandemic, and landlords will now have no recourse.

Thankfully, this is not true. This eviction moratorium only prevents an eviction due to inability to pay the rent. The actual verbiage of the CDC order is as follows:

"Nothing in this Order precludes evictions based on a tenant, lessee, or resident: (1) Engaging in criminal activity while on the premises; (2) threatening the health or safety of other residents; [10] (3) damaging or posing an immediate and significant risk of damage to property; (4) violating any applicable building code, health ordinance, or similar regulation relating to health and safety; or (5) violating any other contractual obligation, other than the timely payment of rent or similar housing-related payment (including non-payment or late payment of fees, penalties, or interest)."(3)

Clearly, this order only prevents evictions over payment-related issues. Criminality and damages are not protected.

3. The CDC Order applies to all tenants across the country. Landlords will automatically find themselves facing legal barriers when a tenant refuses to pay the rent.

Again, this is actually false. Only "covered persons" are protected from payment-related evictions. The CDC Order defines a "covered person" as:

"...any tenant, lessee, or resident of a residential property who provides to their landlord, the owner of the residential property, or other person with a legal right to pursue eviction or a possessory action, a declaration under penalty of perjury indicating that [they meet the requirements]."(4)

The key here is that a person is only covered if they provide the proper declaration to their landlord that states under penalty of perjury that they meet all of the requirements. If they meet those requirements but they're too chaotic to find and fill out paperwork or hire a lawyer to do so, they still have no protection under this order.

Recommended Responses

Contingent on the applicable state laws governing what a landlord can and can't include in a lease agreement, I would recommend the following changes to cope with the CDC Order.

1. Update (or fortify) your lease agreements with your own health and safety clauses, or other non-payment related contractual obligations.

It's important to note that the CDC Order, as above, still allows evictions. They just can't be payment related. I recommend that landlords find several issues that are highly correlated with non-payment, and explicitly include them in the lease agreement as violations that lead to eviction. As a simple example, I live in an apartment community. I notice that in my area, many of the individuals that I'd think most likely to become "problem tenants" don't wear face masks even though the apartment community now requires it. If that were in the lease agreement and they stopped paying, you could still try to evict them for endangering the health of your other tenants. And what would their argument be? "They can't evict me, because the CDC says it's a danger to public health!" "Your honor, we're evicting her because she is a danger to public health--she won't follow our CDC-suggested guidelines!" The crowd gasps at this bombshell, and she is evicted.

2. Increase your document-keeping and monitoring.

This eviction moratorium prevents you from evicting people who can't pay and have exhausted all reasonable means of getting aid and have nowhere else to go and haven't broken any other contractual obligations.(4) Just how strenuous the tenants will be held to these standards will surely vary by jurisdiction. Nevertheless, I believe that documenting and monitoring can go a long way. You want a copy of their pay stubs. You want receipts from their government aid. You want the phone numbers to get in touch with their employers. If possible, you may even want a list of relatives who live nearby--remember, one of the requirements that a tenant must satisfy to avoid eviction is that eviction is likely to cause homelessness--not so likely if mom and dad have a spacious home down the street.

3. Give tenants information strategically

If a tenant is completely ignorant of the details of the moratorium, they may simply believe that they can stop paying. If they believe this, then they will stop paying. You may then evict them, but it'll be a big hassle. On the other hand, if they know all the details, they are better equipped to game the system. I would recommend that you give them just enough information that they understand that they do still have to pay rent. For example, DO let them know in simplified terms that claiming that they can't pay if they have some income to pay (and you have their pay stubs proving that they do) is perjury, which is a felony and carries a fine of much more than their rent payment. DO NOT tell them how to find the correct declaration form or how to properly fill it out or how they could mail it to you. This may seem sneaky, but many landlords here are seriously hurting. If tenants are willing to resort to unjustified legalese to exploit the situation, you should be willing to resort to justified legalese to protect yourself in the same way.

4. Consider revoking your property manager's authority to evict.

Tenants must give their declaration to "their landlord, the owner of the residential property, or other person with a legal right to pursue eviction or a possessory action." If you as the owner are the only person with a legal right to pursue eviction, but they don't have your address or any contact with you, then they technically are incapable of fulfilling the declaration requirement. Having this extra barrier could help pull the law on your side. Tenants often hide to prevent being served. Maybe its your turn to play that card.

These are just a few comments I had after reading through the CDC Order and seeing some knee-jerk reactions that people have had. This order is not good for landlords. It's bad. But it's not the end of the world, and it doesn't even come close to making tenants totally immune to all of their obligations. I'd recommend actually reading over the order itself on the Federal Registry, as it is actually not very long and is much more straightforward than typical legislation.

(1) https://www.whitehouse.gov/pre..

(2)https://www.federalregister.go...
(3) https://www.federalregister.go...
(4) https://www.federalregister.go...

Hello all,

I'm playing devil's advocate in this post. I'd like to hear some experienced landlords who have actually worked with Section-8 and/or know the details of the program guidelines.

We all see Section-8 horror stories constantly here. Many experienced landlords frequently advocate staying away from Section-8 altogether, and I think its fair to say that the overwhelming majority of landlords here are, to say the least, very skeptical of the program. I'm wondering if this represents an accurate picture of Section-8 tenants, or if it is more of a combination of Section-8 housing and survivorship bias.

For those who don't know, survivorship bias is a common type of selection bias in statistics that refers to the fallacy of believing that a select group of people who have passed certain unintentional qualifications are an accurate representation of the entire population. In the context of Section-8, we frequently see flamboyant horror stories that stick in our minds about bad section-8 tenants. The posters are often new, and desperate for advice after having their property severely damaged. But landlords who are successfully using the section-8 program are not rushing to make such highly salient, attention grabbing posts. I've never seen anyone attempt to actually research the percentage of section-8 tenants who inflict damages or commit some sort of fraud--all we have are anecdotal horror stories. How do we know that the horror stories are not just a tiny portion of Section-8 that are over-represented on the forums precisely because of how horrible they are? So horrible that it's worth talking about--the quiet tenant who pays his bills and never makes a scene doesn't spark a discussion.  

This may be compounded by the fact that a "section-8 tenant" is not the same thing as "section-8 housing." The former is an individual voucher holder, and landlords may still screen them. The latter is an entire property that is essentially leased to the government, and the government then places whoever they want in the units.

What made me think of this is an exchange that happened recently between myself and an agent who works with a company that also engages in wholesaling, buy and holds, etc. He said something to the extent of "what people don't understand about section-8 is that it's very rare for a section-8 tenant to do any property damage, because the can lose their voucher. It's guaranteed income with almost no risk." My immediate reaction was to roll my eyes. "Right, I've heard this before. They're just like any other tenant, they've gotten a bad wrap, they just need a chance, etc. etc. I read daily about these 'normal' tenants tearing apart the properties of unsuspecting landlords on BiggerPockets every day. You can't fool me!" I didn't actually say that, but it's what I was thinking.

But then I started thinking about it more. In my locale, the subsidized housing program has a waiting list of multiple years. They just don't have the funding to go around. There is a long line of people eligible for a voucher, and the people who hold the vouchers now are on thin ice... If they do something horrible, their voucher can be given to someone who has been waiting years to get it.

Moreover, HUD allows landlords to submit a special claim for tenant damages, so in the event that the tenant does damage the property, so long as it is well documented, HUD reimburses the landlord. It's like having a free insurance policy from HUD so that they're liable for damages that their tenants cause.

My personal views about the program are irrelevant, and I'm playing devil's advocate to try to learn something. So can anyone argue against the above with facts and evidence rather than just citing anecdotes and common sense?