All Forum Posts by: Jason Turgeon

I use this firm exclusively: https://www.dornerlaw.com/

I have a tenant who is habitually late. He makes 6 figures, but lives in my crappy basement apartment. He's been there a decade. Late fees are illegal in my state, so he voluntarily started paying me more. Weird, but I didn't argue with him. I have never once hassled him about being late. If he gets to 10 days I send him a text. He just needs to be late on stuff, it's part of his personality. I just built it into my accounting that the rent would always be a week late. The checks are still 30 days apart, what do I care what day of the month the 30th day is?

For this small gesture of not hassling him when the rent was late 10 years ago and just quietly shifting his payment date in my mind, I've had a tenant who tells me when things go wrong, keeps the place clean, communicates well, shovels his own steps, and takes the trash out. I've had 0% vacancy and maybe 2% repair costs on this unit for over a decade. Why would I give that up just to get my money 5 days earlier ONE TIME?? After that, the interval between rent checks is the same.

If you have good tenants, do what you need to to keep them. I'd rather have this guy than the person upstairs who moved out after just one year and complained about every little thing, but paid the rent on time.

I used this guy recently and had a great experience. Retired from a big shop, super relaxed and easy to work with, quick turnaround at a fair price.

Somehow I missed this thread when it came out, but I'm glad I did since it gave me the chance to read 8 pages of discussion. 

I take issue with the wording of the original set of questions. Seems like a "push poll" to me. But I will do my best.

1: No, I think gentrification is a symptom of larger issues. People react against "gentrification" and try to stop it but the real problem is economic inequality. Rising prices that displace low-income people from their neighborhoods (which is really what people are worried about when they express concerns about gentrification) wouldn't be an issue if we didn't have such a chasm between low and high income people.

2. No. For the most part, we're following the trend, not setting it. There are exceptions. Wynwood Walls in Miami is one example of developers actively seeking to change a neighborhood for to raise housing prices and push out residents. But those exceptions are few and far between. Generally neighborhoods that are gentrifying are doing so because they were originally great places to live that fell on hard times and now people have once again begun to recognize them as great places to live.

3. No, for the reasons stated above.

4. No, because to date I live in the community I invest in. I am grappling with how to ethically invest in communities with better ROI, but I'm not sure there is a solution for the individual small investor. If my choice is to stop investing and keep working my W2 forever or keep investing and risk playing a tiny role in a larger societal problem, I'm going with the latter. That said, I'm not interested in displacing residents, just giving people a decent place to live at a fair price and making an honest profit in the process.

5. What are the alternatives? This is where the discussion has been really lacking.

The biggest thing to realize is that our national heritage is one of wave after wave after wave of immigration and development and building and displacement and resettlement. Our entire post-colonial history is one of mobility and displacement and constant, unending change. In particular, this change really took off at the beginning of the industrial revolution/end of the American Revolution. The last 200ish years have been unrelenting in the pace and scale of change.

Why does this history matter? Because it places the changes we're going through now in context. People who have lived in a neighborhood since some date in the 60s often complain about being "pushed out," but the truth is that just one or two generations ago they were the ones doing the pushing.  

My neighborhood in Roxbury, Mass (part of Boston) is a good example. Since ~1776, no two generations of people have experienced Roxbury in the same way. 

I could write a book about the changes, but the important thing is to understand that they happened, they are constant, and there is a regular interval to them.

So part of the answer to question 5 is to recognize that change is constant and that it cuts both ways. The neighborhood your parents moved into when they were of child-bearing age is almost never the same by the time you are of child-bearing age. Educating people on this constant cyclical change is probably a big part of defusing some of the tensions around the gentrification discussion.

The next thing to cover is that gentrification (aka displacement caused by changing economics) is caused by supply and demand. The places where it is worst are the places where those 2 are the most out of balance. And those places tend to be the places where good liberal thinkers (I count myself in that group) have tried to control the free market - usually with the best of intentions - and placed all kinds of restrictions on building new housing. This worked out OK in the 70s and 80s when demand was low, but now that demand is high the restrictions on supply are contributing to these extreme bubble-like prices we're seeing. 

But the people who would most benefit from fixing the supply-demand imbalance (the existing residents) and stabilizing prices are often the ones who fight hardest to stop new supply from coming online. For some reason, housing activists are convinced that housing is not impacted by basic economic theory. They spout gibberish about developers *causing* gentrification, and rents being *controlled* by developers. If this were true, I as an investor could go buy up a few blocks of post-industrial wasteland in any one of a hundred failing cities around the country, throw in a coffee shop and a yoga studio and some concrete counters, and just start raking in the dough while simultaneously destroying the lives of the locals. For some really top notch economic analysis of restrictive housing policies making housing less affordable, look at the work of Harvard economist Ed Glasier. There's also an excellent new study out from the Mass Smart Growth Alliance that dives deep into how skewed our development restrictions are and how they are driving housing price surges as people swarm into the area in search of jobs and a high quality of life.

The reality, of course, is that developers can do no such thing. The fundamentals of the area have to be improving before investors come in. Revitalization is a symbol that economics are improving. New housing follows the other indicators, it doesn't cause them. 

So change is constant.

And our housing prices are spiking most in areas where demand is high but we have put artificial caps on housing supply.

But there's a third piece, and that gets to the real heart of the emotional response to gentrification and a lot of the clumsy conversation around race and privilege that has been happening in this thread. And that is *opportunity.*

Time after time, there is a mismatch in the skills needed for the new employers who are driving these prices up - the expanding hospitals, the tech companies, the finance firms, even the real estate agencies and developers - and the skills offered by the people who had been living here. Rising housing prices wouldn't be a big deal if the old residents were able to get these high-paying new jobs. And while this mismatch isn't always race-based, it often is. I have neither the time nor space to delve into a history of systemic discrimination in America, but it is real and it is pervasive and it is well-documented. Anyone who cares to learn more about it is only a google search away.

Bringing it back around to my comments about income inequality, this is the real driver behind all the sturm und drang about gentrification. It's not that people object to housing prices going up, it's that they object to not being given a chance to work at the jobs that would enable them to pay the new higher rents. They object to feeling like they always get the leftovers. 

You can point to all the "pull yourselves up by the bootstraps" stories and "I saw a poor person who did this dumb thing" anecdotes you want, but the cold reality is that a lot of people are not participating equally in our current economic boom. And that is what is driving these very heated discussions in so many parts of the country.

So is there a solution to the "problem of gentrification?" Yes, but it has very little to do with us. It involves figuring out a way to address the rampant income inequality in this country that is creating a handful of winners and a whole lot of losers. It involves trying to grapple with a history of unending change that many people feel overwhelmed by. And it involves addressing supply and demand issues that are often caused by well-meaning, but misinformed, citizens. Those are the real underlying causes. Gentrification is just a visible symptom.

A drop in the bucket of the overall need, and many of the rezoning projects they are proposing will be fought tooth and nail by the very people they are aimed at helping. But it's better than nothing, and a great deal better than anyone else is doing.

You didn't say what help you needed. 

Getting zoning relief for the 2 extra units will likely take you at least a year, so you will have carrying costs on the land, but those aren't terrible on such a small loan amount. Do you have a contingency plan in case the neighbors fight and you can't get the zoning relief? Given how cheaply you got the land, why not just build 2 big units as of right and get started soon? 

Architects are in high demand and the good ones can pick and choose their clients. Don't begrudge a professional their salary. You can't do this project without someone very good in your corner.

Your expected construction costs seem a tad low to me but you should be able to pull it off under $200/sf which would still give you a decent profit with your low land cost. 

Edit: I'm a real estate agent. Not sure what kind of services you expected on a pure land deal at a low cost. The agent will walk with maybe $1000 at best, probably less, on a $50k deal. It's up to you to do your own homework on ARV, neighborhood, etc.

Use an agent who specializes in local rentals. The tenant will pay the fee + first, last, and security. I don't collect security deposits because of the major headaches surrounding their handling in Mass, FWIW. 

Make sure the agent pulls credit reports on all signers of the lease and make sure you review them. I usually let student loan issues slide because they are so common (our nation's tenants are drowning in student loan debt) and I don't want to screen out otherwise good tenants, but things like missed credit card payments, missed car payments, and of course missed rent payments that get reported to the credit bureau usually require some probing questions.

In your Brighton place, you can legally specify no undergrads. I won't rent to them because of noise and property damage potential, and your neighbors will thank you. But of course, you limit the pool of potential clients.

OK, I'm going to give you some tough love. I'm sorry if it hurts. 

This place reeks of cut corners.

Pull it off the market for a few weeks. During that time:

* Hire a professional real estate agent, not a flat fee service. You're in business now. Professionals don't try to cut other professionals out of the business, they see the value in paying for experience. Almost every buyer will be working with an agent, and as an agent I can tell you I would never show this place to a client. Listen to your agent when they tell you what to change and what to price it at. 

* Try to make up for the corner you cut by not hiring a designer. Repaint at least a couple of rooms with more modern colors. Upgrade the cheap lighting fixtures and make sure all the bulbs work. Install modern, stylish cabinet and drawer pulls. Next time, hire a designer to help you avoid these mistakes. 

* Get the property staged by a professional staging company. They'll help you hide some of the shortcuts you took (like the acres of LVP) and help buyers visualize themselves in the house. 

* Address any landscaping issues and exterior touches. You can do it yourself, but make sure it looks like you hired a pro. The landscaping looks OK but the exterior pictures are pretty blah, especially the side with the back door and the crooked siding. Do what you can to pretty it up. 

* After you've done all this, and only after, get professional photos taken and relist it at the price your agent suggests. It may be significantly lower than you're asking. 

Edit: 

Where's the fridge? Are they supposed to provide their own? 

Kitchens and baths sell homes. For next time, read up on functional kitchen design. The kitchen and master bath layouts are so unfortunate, and it's unfixable without serious money. 

The island is set up so that the stools face the kitchen sink. The island blocks the path from the sink to the stove. The stove is on an interior wall so that you can't install a proper exhaust fan to vent smoke. Again, there's NO FRIDGE. And then there's the little stuff, like the missing pulls, sink that's undersized for the space, upper cabinets that could have reached the ceiling but don't, weird dead space in front of the breaker panel, oddly hung light over the island, etc. I can see the buyers turning around and leaving now. 

And that's before they get to that master bathroom with the toilet smack in front of the double vanities, the mirrors that are out of proportion for the wall, the stickers still on the shower doors, and the roll of toilet paper with no home. 

There's no fixing these layouts, so again do what you can with staging and pricing. 

Man, your wife has a real talent there. I never appreciated interior design until I renovated a 2 family home and realized just how hard it is to make all those decisions and do all that shopping and price comparing. My wife and I decided to hire a designer half way through our project. I won't make that mistake again - next time we start with the designer before we get to construction so we know what the layout, colors, and materials are going to be. Even on a cosmetic flip, I want someone with your wife's sensibilities to help me deliver a product that will sell in a weekend. Looks like you're pretty good at the construction side of things, too! 

I use Cozy for a couple of my tenants. I also use quickbooks for my schedule C business and it allows me to accept payments - I think every level of quickbooks except self-employed allows you to accept payments by bank transfer or credit card. If you're already using it for bookkeeping, why switch?