All Forum Posts by: John Kunick

 Sorry to be evasive, but it all depends on what your objectives are.  If it is to buy a rental property and hold onto it long-term then the answer is probably yes.  If it is to flip it and make quick profit, then probably not..  Trying to time the real estate market is tough, but usually works out in long-run with cash flow and build up of equity.

One other key, IMO, is to focus on Class A and B properties where tenants tend to be "aspirational" in nature.  These tenants tend to be accountable and responsible as they want good credit score and rental history so they put themselves in best position to buy their own house down the road.  This is a generalization, but by and large the EM issues have been in C and D properties with relatively little (not zero though) issues in A and B properties.  And, if the EM has taught us anything, it is that diligent screening of tenants is crucial.  I have all A/B properties and have only had two issues with EM and both were marginal tenants that I was hesitant to rent to but decided to take a risk (this was pre-COVID and EM).  Lesson learned!

@Mitch Jones, IMO, your concerns are warranted, but your post kinda answers itself. In real estate, we've always heard about location, location, location. Let's expand that to say it's about location within the United States. As many have referenced in this thread, your best locations are states and localities that are not heavy handed.. For this reason, I have built a large portfolio of both SFH and MFH in Oklahoma, Texas and Florida. Think the reasons are obvious. That is not to say that other areas are not good locations, but I'd prefer to play in areas where government, by and large, let's me provide a good quality product to tenants that respect and respond to good landlord relationships (relationships can not be over-stated no matter the location) and stays out of the way.

Secondly, I do NOT and doubt I ever will do any type of government real estate subsidy (Section 8 as example) as I do not want to invite any form of government to be my partner.  To expand upon that, I only do Class A and B properties as they tend to attract "aspirational" tenants who eventually want to buy their own house.  Thus, they tend to be more accountable and responsible.  So, location and type of property is more important now than ever before.  As a side note, I did a few class C properties a few years ago (although I did not allow any section 8).  I sold them less than a year later as my experience, although reasonably profitable, was not worth the headaches and hassles of dealing with the tenants they tended to attract.

Lastly, if the eviction moratorium has taught us anything it is that screening and doing due diligence is more important now than ever before.  In that respect, longer term, I think the EM will have the exact opposite effect that the liberals intended (can you say negative unintended consequences).  Before, landlords like me were willing to take risks with marginal tenants.  The only issues I've had with the EM were the two marginal tenants that, in hindsight, I should not have taken the risks with.  Lesson learned!

 Padam, without knowing what state you live in nor when your lease ends and what is specifically outlined in your lease about "notice to renew or vacate" it is hard to give you specific advice..  But, generally speaking, I agree with Nathan and Jon in terms of this tenant sounds like he is managing your property - not you.  IMO, you need to rid yourself of this tenant and move on to better pastures.  But, as Chris pointed out, these times right now might make it challenging to move on..  So the question becomes how best do you rid yourself of this tenant?

Hi David, first, congrats on all you've done at this point..  Having read all of the responses, the people here are giving you great advice.  To me, it would seem your wife has just used EM as the latest "excuse" to not move forward so there really is an overall general hesitancy that you/she needs to get past.

If it's any consolation, my wife also was hesitant for much the same reasons you provided.  This was 10+ years ago when we were just starting our RE venture.  Now, she's the biggest cheerleader!  And, we've been able to retire based on the RE ventures.  But, like someone else suggested, we had significant cash reserves which helped quell her fears as she saw we could "ride the storm out" if necessary.  Thankfully, the storm never materialized and we used those reserves to double/triple down once she saw how well the rentals were working out.

I would also say make sure the first one or two are either Class A or B which will attract tenants that most likely will be "aspirational" (want to get to point they can buy their own house so they will go above and beyond to make sure you get paid).  Once you do your first one or two successfully, your wife will most likely be pushing you to do more and the roles might become reversed :)

@Bobby Larsen, I've read this entire thread and would like to take a stab at encapsulating it as I actually understand, or at least think I do, everyone's responses..  It's the differences between macroeconomics and microeconomics.

Macroeconomics - inflation is up, there is way too much money out there chasing  lower housing supply, interest rates are probably artificially low and we have supply and labor chain issues due to COVID and never before seen levels of government "regulations" at both federal and state/local levels.

Microeconomics - Some cities, states, regions are doing better than others.  Some people are moving out of areas (for whatever reasons) and moving to other areas.  And, we have illegal immigrants moving to all areas of the country creating a hard-to-measure impact on rental demand.  Add to that, the eviction moratorium seems to have very little impact on Class A/B properties (and some would say it's actually benefited A/B) while it's had more impact on Class C..

I could add to the items above, but if you read all the posts, think you will see a common theme is macro vs. micro..  So, what should a savvy investor do?  What they've always done, but probably need to do more of and do it more diligently, and that is research about the dynamics that are going on in each sub-market and due diligence about what the future looks like based on those dynamics.

What is going on in California is entirely different than what is going on in Tulsa..

Hi Eric, I'm just curious why you think all adults who live in the property should be on the lease?  I actually disagree and my experience saids that usually, except in cases where the two adults living in property are married,  only one adult should be on lease and therefore that person is totally responsible for rent and all matters of the lease.  Early on in my landlord experience, I had every adult on the lease and it ended up with me having to chase multiple people for rent and lease issues.  Now, I only have one person..  Yes, that person has to be really responsible, but I've avoided repetitive multi-tenant issues where I'm put in the middle of issues like the one mentioned at the beginning of this post.

 Non-renewal is a totally different issue than eviction (which is a legal proceeding)..  With non-renewal you typically just give them notice that you are not interested in renewing their lease and are advising them to vacate the premises.  The amount of notice is most likely a matter of state or local law.  Also, those laws might dictate that you have to provide explanation of why you don't want to renew and the method by which you must communicate.  The key point that non-renewal is not a legal proceeding.

An eviction is a legal proceeding.  As @Dave Poeppelmeier outlines, what you need to do for an eviction varies by state and county.  IMO, the best thing for you to do, should you want to start an eviction, is contact a local RE attorney and start building a relationship with him/her.  If you do plan to self-manage your properties in future, this relationship will be helpful..

Either way, best of luck!

@Bear Geiger, the best advice IMO in terms of avoiding issues with Eviction Moratorium is to do best tenant screening up front. The second best advice is to buy properties in the A/B category that tend to attract accountable/responsible tenants. In our state of Oklahoma, we tend to be landlord friendly, so I have an 8-page lease that I got from a local RE attorney. Like others have said, since I started a relationship with this attorney by paying him for the lease, I have a built-in network to help me when evictions or other tenant issues come up (it's amazing how tenants react to getting a letter from an attorney). As others have said, your lease will not protect you from federal or state law (not that the EM is law per se since even Biden has said it's unconstitutional) so your best bet is to do the things outlined.. BTW, in all my years of doing SFH, I've only had to do two evictions and not one of those has been during EM.. Not bragging and really am thankful, but would greatly encourage you to heed the advice that those here have given as all of it is solid..

Hi Leroy, first, congrats on the duplex.  Is this your first rental property?  Second, have you built a good relationship with these tenants? Third, what does the lease say about options at expiration (30-day notice for example)?

I would sit down with each of them, probably 30-45 days before end of current lease, and provide them a list of options, all based on what the current lease outlines, which might go something like this:

• 1. You can continue to stay in the duplex, as is, meaning there will be no upgrades.  But, your monthly rent will go up based on market.  Since you are not upgrading the unit, maybe you raise the rent by half of the difference between current and market.  We will sign a one-year lease and re-evaluate at end of year.
• 2. You can continue to stay in the duplex for another sixty/ninety days, but must move out by that time.  This will give the tenant extra time to evaluate their options, find another place to live and also see that you are working with them.  Maybe keep the rent the same or raise it by $50 per month as a month-to-month premium
• 3. Ask them to leave at end of lease.  Let them know your intention is to totally upgrade the units so that eventually you can raise the rent to market.  Be very open with them about what the market has done over past couple of years.  This should be an open give and take where you ask them what their intentions/options are.

You might find out that only one of your tenants wants to stay and the other wants to go.  If so, you've created a win/win situation for yourself.  You not only continue to get paid rent on one side, but you get to upgrade the other side and test what upgrades will fetch what rent.  Also, the tenant that stays sees what you are doing and may say "hey, when you get that other side done, I'd like to move in and will be glad to pay you what your asking price is"..  I've had almost this exact same scenario with a duplex here in Tulsa.  By doing this, I was able to spread out the renovation expenses over six months, collect rent on one half, convert a somewhat unknown tenant into a really great tenant and then eventually I got the other side rehabbed and now both sides are paying market rent!

Hi Connor, first, best of luck with your first property and with all of your REI in the future! Second, I would encourage you to go back to the sellers to determine if the current tenant has a lease in place. If there is a lease, then usually state law will dictate you must honor the existing lease. If no lease, then I would approach that tenant and be very professional and ask what their situation and intent is. Like someone else said, killing them with kindness to create a win/win has always been the best approach.. Third, I've had these situations many times in the past.. By far, the best approach is to do your due diligence up front before you close on the property. I've even arranged for both myself and the seller (who should have a relationship with the current tenant) to go meet with the current tenant to inform them the property is being sold and letting the tenant know what your intentions are (to be a very good landlord) and to ask them what their intentions are..

Again, best of luck with your REI!!