All Forum Posts by: John Barrett

Quote from @Ray Hage:

Quote from @John Barrett:

Quote from @Dennis Nguyen:

Wow, thank you for sharing John! Looking back, was there anything you could have done differently to avoid this?

Hi Dennis,

I would love to say there was nothing we could have done differently, but that is not true.  In early 2020, we made the conscious choice to take a chance on these tenants.  They had both had blemishes on their records but had been clean for roughly a year and a half.  We have have rented to a number of tenants before who had issues in their past but were excellent tenants.  Unfortunately, in this case it didn't work out that way. 

When it became clear we had made a mistake, the pandemic was in full swing and the regulations governing evictions were suspended and then changed.  As a result, we have had to change our screening process / criteria to be more strict.  What made this situation manageable was are conservative investment strategy.  While it has limited some of the upside, it prevents these types of situations from putting your investment at risk.

John

 Sorry this happened to you and your investment property! This is such a big expense and so many months of lost income. Kudos to you on keeping positive and getting it fixed up. I'm not familiar with Snohomish county laws on tenants. In a state like WA where the tenant rights are strong, are you considering keeping your next lease as a M2M to avoid having a longer term problematic tenant? As an investor, I keep most of my tenants M2M and the large majority have stayed well over 1 year. I essentially tell them as long as they pay rent and don't make problems, they are welcome to stay forever.@]

@Ray Hage We historically used a 6M lease when we are placing a new tenant.  The new "Just Cause" regulations in WA basically make all lease agreements automatically renew unless they are term lease with a specific end date (with 60 days prior notice).  We are finding that charging higher rents has improved the quality of the candidates who apply for our units.  That said, we are still utilizing more strict screening criteria. I will take another look at using M2M leases but I know these have been targeted by regulators to limit a landlords ability to utilize them.

Quote from @Dennis Nguyen:

Wow, thank you for sharing John! Looking back, was there anything you could have done differently to avoid this?

Hi Dennis,

I would love to say there was nothing we could have done differently, but that is not true.  In early 2020, we made the conscious choice to take a chance on these tenants.  They had both had blemishes on their records but had been clean for roughly a year and a half.  We have have rented to a number of tenants before who had issues in their past but were excellent tenants.  Unfortunately, in this case it didn't work out that way. 

When it became clear we had made a mistake, the pandemic was in full swing and the regulations governing evictions were suspended and then changed.  As a result, we have had to change our screening process / criteria to be more strict.  What made this situation manageable was are conservative investment strategy.  While it has limited some of the upside, it prevents these types of situations from putting your investment at risk.

John

@Bjorn Ahlblad Thank you for the feedback.  I did use WLA associated attorney to process my case.  I feel having professional representation is more critical than ever with all the new regulations.

I hope others view this post in a positive light. I love real estate investing.
Taking the risk to invest significant capital and improve the housing in a community is one of the most noble things you can do.

I don't love the regulations my elected representatives are pushing as it results in less rental housing and harms my community. I know not everyone feels the same but that's my opinion. :)

John

@Jennifer Moraski The lost rent was due to our non-paying tenant for all but 1 month. The actual eviction ended up taking 11 months in total due to the leadership of the ERPP changing the rules halfway through our initial eviction and our attorney having to start the process over again. This unfortunately was just an example of the program leadership changing the rules of the program to delay the process. My understanding is it affected about 80+ eviction cases in Snohomish County causing them to have to restart the process as well.

This unit was not scheduled for rehad as we had previously installed new flooring and refinished cabinets in late 2018. We had done some other minor upgrades such as new doors, paint and lighting but it wasn’t a major overhaul of the unit.

Total time frame for the rehab was about 2-3 weeks.

Regards,

John

I created this post to address a question I get from many other landlords.  What if I have do an eviction (and what will it cost)?

During the pandemic many landlords in WA State were prevented from evicting problematic tenants from our properties.  The attached collage of photos shows the unit when we received possession via the Sheriff, through junk out of the unit and rehab.  I have summarized the actual costs incurred to provide insight as to what reserves people need be prepared for.

Our lost rent amount was larger due to the specific policies of our state legislature.  In this case the tenant issues were not related to COVID but rather drug addiction.  This led to other nonresidents coming and going from our property as well as additional illegal activity.  The police officers were wonderful but very limited in what actions they were allowed to take.  Navigating the new ERPP (Eviction Resolution Pilot Program) is designed to be intentionally complicated to delay evictions at owners expense.  The case workers supporting the program tried to assist where possible but are constrained in what they can do by the rules of the program.  Our tenant never participated in any aspect of the program.  Her sole motivation seemed to be to continue occupying the unit and further her illegal activities with her associates for as long as possible. Unfortunately this meant that the residents of the other 3 units of this building effectively had no right to quiet enjoyment  / safe living environment due to the current legislation.  Obviously this is just one example but I think it can provide insight into what challenges investors should be prepared for.

My hope is you take away from this post:

1.) Ensure you understand the current landlord tenant regulations and importance of tenant screening.

2.) Have sufficient cash reserves / access to capital.

3.) These situations are not insurmountable, but you need to have capital, professional support and a plan.

I hope this specific case study of challenges a landlord will sometimes have to overcome has provided some insight to you.

John

@Brandon Dorman I would suggest following @Nathan Gesner advice.  Commercial property is similar but different from residential.  There are standard forms but they tend to be written as if both parties to the commercial transaction are experienced professionals.

None of this is to say you can't use a form you got off the internet but why would you?  The risk / reward trade off of saving the money by not hiring an expert do not seem worth it to me.  If the deal is good, the cost of getting expert advise will materially change the numbers on the deal.

Best of luck,

John

@Tanner Van Staveren While not exciting advice, I suggest everyone start by focusing on building up your savings.  It takes time to save money but this is an opportunity to practice delayed gratification and build your resilience.  Regardless of what you see online, owning real estate tends to be a long term journey for most investors.  Having capital and showing progress towards saving / learning goals demonstrates to other you are serious about being a successful real estate investor.

Best of luck,

John

Quote from @Jamie Laliberte:

@John Barrett Thank you. Do you know other investors in this area that might be able to help.

@Jamie Laliberte I don't really know any wholesalers personally.  I would suggest starting joining some of the local Facebook investing groups.  I personally like WAREI but there are a number of WA Landlord groups as well.  This will let you see who is actively doing wholesaling and allow you to connect directly with them.

I see a lot of people who look at wholesaling as the way to jump into investing.  Many do not appreciate the amount of work / how difficult wholesaling can be. I often suggest that people find a good paying job and focus on savings as a means to build capital.  Not saying this is what you need to do but just something to make sure you have thought about.

John

@Jamie Laliberte Totally understand and I can't be much help with that.  My strategy is more the save for down payments and then purchase for long term holds.

John

@Jamie Laliberte I am an investor in Snohomish County. Feel free to reach out and I am happy to answer any questions I can for you.

John