All Forum Posts by: Brian Ploszay

There are landlords that have had non paying tenants for almost a year.  Non paying tenants are damaging to landlords.

I am sympathetic to covid related tenant defaults and I work with them.  If they do not communicate you have to eventually remove them.   

In the meantime, continue to try to communicate.  I have offered rent discounts if they work with me.  I have offered cash for keys for them to move.

But if they won't communicate, they are becoming an adversary.  In this case, start the eviction process as soon as possible.  Which in many parts of the country is not for awhile....

Your timing was good.  However, earlier in 2020, I was predicting a housing slowdown.  I thought we were at top of the market pricing, plus Covid was devastating portions of the economy.

I was very wrong.  It wasn't just the low interest rates, but a variety of factors.

But this market isn't forever.  

Congrats on your success.

If he lied on the disclosure, then yes.

Keep in mind, if you have a property issue, and then you fix it, you may not have to disclose the historical issue.

I sold a property that had a bad roof.  But I replaced it before marketing the property.

Be cautious in buying turnkey properties in general.  Let's focus on the cheaper product.   Many of these are located in class C neighborhoods.  Or they are in areas that look okay, but the region might be in decline.  Everyone who buys these properties should do as much research as possible, get an independent inspector, find your own financing / appraiser.  

What can go wrong?  Expenses might be excessive, especially the turnover when you have a vacancy.  And liquidating the investment one day might be tricky.  Pay too much - you might sell your beat up rental 5 years down the road at a loss.

Beware of turnkey properties.  Often they are overpriced houses that are in lower middle income areas in declining regions.  Hence you might not get sufficient appreciation.

Also, the proformas rarely mention the true costs of maintaining houses in C+ areas.  And the huge turnover costs for vacancies.

Cash for keys is the answer.   If my market, the tenants have lots of rights.   An eviction, if contested, will take six months, maybe more.

I offer around $200 to $600.  During the early phase of Covid, when I realized that a non paying tenant could stay over a year, I was prepared to offer $2,000.   I struck a deal at $1,100.

I also possibly offer a guarantee not to go after back rent.  And I have even cooperated in sealing the eviction from their records.  I NEVER gave them a recommendation letter, although I was asked.  

Evictions are very expensive if I include lost rent, downtime and attorney fees.   I altered my whole business plan to avoid the types of properties, locations and tenants where evictions are common.

@Dan Heuschele    Kudos to California's economy.  Indeed it is an economic powerhouse.  But people are leaving, so we're trying to figure out why.  And it is housing.

==Too many people want to live in Coastal California==   True, but my parent's house is in Pasadena which is 21 miles away from the nearest beach.  Inland California is pricey too.

When I use the word "density,"  I mean the number of units on a particular parcel of land.  Manhattan is super high density.  California could be much higher density if zoning allowed it.  Santa Monica would be pure mid rise and high rise buildings if they could be built.  Yes, people would continue to come.

Southern California is a major world metropolis.  And a very horizontal one.  They call it sprawl.  High prices are a factor of supply and demand.  When there is perpetual low supply, the prices are high.  That's California.  

California has the lowest amount of units per capita in America.  Equalized to an average, California is short 2 million units.  Density housing, is the only way.  There is not enough land.

That ain't gonna happen, so the state is having an exodus of people.  I don't think it is a major loss, but for a State that has a good economy, it should be the opposite.

Since this is a real estate forum, I would like to add that expensive real estate prices is a main factor for the California exodus.   My connections to California are deep, and I was from Southern California.

The prices of housing are too expensive.  How did we get there?   30 years of population growth not met by expansion of the housing stock.  In other words, it is difficult to build new construction in California.  It was ranked as the hardest state.

The human costs of this are huge.  It is the reason for the large homeless population.  It is the reason for the large poverty rate.  And it is a major factor in the exodus.  

State leaders, to some extent, understand this.  And are promoting more density housing.  But NIMBY (Not in my back yard) movements stall this.  Plus the enormous regulations and zoning issues.  

A great article in the magazine the Economist, stated that California's housing issues have caused its economy to lose money.  That is more true than ever as companies, along with people, are fleeing the State.

Normally a property should produce a stable cash flow when you buy it.  But that maxim doesn't work usually in practice.  Historically, I have bought mostly properties that need work.   But within six months, they are producing a cash flow.  I am a cash flow investor.

Yet recently I bought a single unit property in an expensive growth market.  So far it breaks even.  If a major repair comes up, it will lose money.  I still like the deal as I am a long term investor and I am going to make a small bet for appreciation on this one.

To purchase properties in pricey places like California in the last decade, you forgo cash flow for appreciation.  In time rents grow.  But eventually it may become a cash flow positive property.  

Do not feel bad.  We are in a seasonal market.  People simply move less in the wintertime.  Now, the rental market is slower in parts of the Chicago, compared to previous years.  Blame it on Covid.

Next, put the apartment listing on as many platforms as possible.