All Forum Posts by: John Kunick

Originally posted by @David P.:

Originally posted by @John Kunick:

Originally posted by @Brock Bonnicksen:

I have an issue with a tenant repetitively clogging the sewer, and requiring a plumber to unclog each time. The first two times I hired the plumber and covered the costs. The plumber believes it is an issue with use - flushing too much, or things that shouldn’t be flushed. At this point I’m unsure what to do since it’s not an issue with the actual sewer. Do I notify the tenant that they need to hire the plumber to unclog? I have attached a copy of that section of my lease agreement, which specifies MAJOR repairs are landlord responsibility and MINOR repairs are tenant responsibility. If anyone has any thoughts on how I should approach this, please provide feedback. Thanks!

Hi Brock, I've had almost the exact same situation. The key was I had
proof of what was clogging the sewer since, the third time the sewer was
clogged, we sent a camera down the line to see what was obstructing
it. Lo and behold, their young kids had flushed some small plastic toys
down a toilet and they caused an obstruction that led to continual
clogs. So, we had to have them dig up the sewer line at the point of
where the clog was and physically remove the toys (an industrial
strength snake was attempted first but could not break up the toys so
they would pass). This was a big ticket expense that the tenant could
not pay up front. The agreement I made with the tenant is I would pay
for the job up front, but he would pay me an extra per month fee until
the total reimbursement was achieved. Fortunately, they have re-paid
the full amount. The key was having the proof and getting the tenant to
understand it was his "negligence" that caused the issue.

Don't know if this will help you in your situation, but good luck..

@David Pai, the good news is it was out in the yard so no crawl space nor jackhammering necessary.  The bad news is it was buried deep so we had to get a backhoe out there.  Once we got access, it was an easy fix.  Total cost was $3400 which included the initial snaking, camera run, backhoe and then reconstruction..  As mentioned, the tenant took responsibility and has reimbursed.  This actually ended up being a positive as he was very thankful that I was willing to work with him.  I've read a couple other "hard nosed" responses and actually don't agree with them unless there was really good proof from the plumber that it was tenant negligence..  From reading the initial post, the plumber said "he believed" it was tenant negligence.  But, without proof, you might alienate what could be an otherwise good tenant.. These types of issues need to be handled with delicacy until negligence is established.  Guess a lot of it would depend on knowing the tenant..

Josh, glad to hear you appear to have resolution to your situation.  It was informative reading all of the various responses. I particularly liked the comment that your definition of "excellent tenant" didn't fit the other respondents..  I totally agreed with him..  Here's why. 

When I agree to rent to a prospective tenant, I have a conversation with them that goes like this..  "I'm glad you are going to be an excellent tenant, but want to provide our expectations of how we define an excellent tenant.  That really encompasses three vital things..  First, you must pay your rent on time as outlined in the lease agreement.  Second, you must maintain the property as outlined in the lease agreement.  Third, and most importantly, you must communicate with us about any items that you think need attention or should your situation change and also what your intentions are 30 days prior to the end of the lease which is detailed in the lease agreement"..  I also go over with them what being an excellent landlord looks like to them to try to make the point that we want to have an excellent relationship with them and part of that is knowing what is expected and communicating.  I"m repetitive to them about communication is critical to a win/win relationship.

Finally, someone else mentioned doing only month-to-month agreements.. That's an interesting idea that we may have to investigate. We do twelve month agreements up front, but they automatically convert to month-to-month (w/ rent premium) should they not be able to make a long-term commitment.  So, we have a clause that saids they must give us 30-day notice of intent to extend lease or vacate, but it will convert to MTM..  And, as someone else stated, I send them a "friendly reminder" email and text thirty days prior to their thirty day notice being due..  Usually, when I send out the friendly reminder, I get a response pretty quickly and usually it's "we'd like to renew our lease for another year or two".  Then it's just a matter of agreeing on what the new rent will be..

Again, glad you appear to have resolution!

Originally posted by @Brock Bonnicksen:

I have an issue with a tenant repetitively clogging the sewer, and requiring a plumber to unclog each time. The first two times I hired the plumber and covered the costs. The plumber believes it is an issue with use - flushing too much, or things that shouldn’t be flushed. At this point I’m unsure what to do since it’s not an issue with the actual sewer. Do I notify the tenant that they need to hire the plumber to unclog? I have attached a copy of that section of my lease agreement, which specifies MAJOR repairs are landlord responsibility and MINOR repairs are tenant responsibility. If anyone has any thoughts on how I should approach this, please provide feedback. Thanks!

Hi Brock, I've had almost the exact same situation. The key was I had
proof of what was clogging the sewer since, the third time the sewer was
clogged, we sent a camera down the line to see what was obstructing
it. Lo and behold, their young kids had flushed some small plastic toys
down a toilet and they caused an obstruction that led to continual
clogs. So, we had to have them dig up the sewer line at the point of
where the clog was and physically remove the toys (an industrial
strength snake was attempted first but could not break up the toys so
they would pass). This was a big ticket expense that the tenant could
not pay up front. The agreement I made with the tenant is I would pay
for the job up front, but he would pay me an extra per month fee until
the total reimbursement was achieved. Fortunately, they have re-paid
the full amount. The key was having the proof and getting the tenant to
understand it was his "negligence" that caused the issue.

Don't know if this will help you in your situation, but good luck..

Kevin, congrats and thanks for the details! Like you, I'm in Tulsa area and have built a nice portfolio of SFH and now have transitioned into MFH. One good thing with putting 30% down is you will be significantly cash flow positive.. Sent you a Colleague Request. Would be happy to buy you lunch and see what your plans are and tell you both the good and the bad that I encountered while building my portfolio..

Unfortunately, I think the Mom and Pop selling off is by design.  I agree with you that the EM is illegal and I'd say unconstitutional.

Michael, I just got banned for "Spamming" which I'm not even quite sure what that means.  I sent a few "connection" requests out this morning, but did not do any copy/paste nor did I link to any websites..  Can you help me out here?  Thanks.

@Grant Maxey and @Brian Holt, sorry to correct, but SFH is indeed Single Family Homes, but MFH is Multi-family homes (apartment complexes primarily)

@Kristin Cooper, first, best of luck with your decisions as they can be life-changing..  Getting into real estate was one of the best decisions my wife and I ever made and has enabled us to retire in our mid-50's.

Second, we are heavily invested in SFH in Tulsa area and MFH in Dallas so I can only speak to those markets.

Generally, though, I don't see similarities yet between the housing crisis of ~ 10 years ago and now (when we picked up a lot of SFH from distressed mortgage situations). As someone else stated, the forbearance rate doesn't mean anything at this point. We won't know if it means anything for a few months.

RE: Tulsa... So far, we have not seen any negative impact as our collections are actually better than ever. If anything, it's been a positive as tenants seem to be putting more focus on financial discipline that perhaps they didn't have a few months ago. Will see if that continues. BTW, Tulsa continues to be a fairly stable housing market that is attractive to buy and hold investors. While we don't see big appreciation, we also don't see big depreciation. Keep in mind, I only have SFH in Tulsa and they are all upper blue-collar/lower white collar neighborhoods (specifically in the 3/2 category in suburbs with good school districts).

RE: Dallas..  We only have MFH and they are all B properties.  Again, we are pleasantly surprised with rent collections.  We are glad we chose B properties as we do see some "Step down" effect of people in A properties wanting to save some $ and moving down to B properties as they still have similar amenities.  We don't see people moving from B to C, but who knows if that will happen should this continue too much longer.

My advice for long-term investors:

1. Know your goals - do you want to buy and hold and build cash flow or are you looking to buy and sell?  These are two very different goals which require very different strategies.

2. Buy the right categories - if this COVID has taught up anything, it is to be in the right categories that are as recession proof as possible.  Unless you have government guaranteed rents, C's would not be a good category to be in right now.

3. Capital is King! - If there are any forbearance issues, it will most likely be with investors who were not well capitalized and couldn't therefore weather storms.  This was critical to the housing crisis both for those that lost houses as well as those  who had a lot of capital on the side and able to pick up houses at discounts.  Now is the right time to build capital if you don't already have it.

4. Constantly evaluate your strategies - Are your strategies helping you achieve your goals?  If not, readjust.  If so, stick to your knitting!

Again, best of luck!

@Rhett Tullis, thanks for this thread.  Full disclosure: I own several residential rentals in Tulsa and multi-family in Dallas.  I DO NOT own any commercial even though I've had many opportunities to buy them.  I've always subscribed to "they will always need a place to live no matter what happens to the economy" theory and therefore just never could pull the trigger on commercial.

Having said that, several of my friends and I have been talking about what life will be like in six months after the COVID panic is over.  By far, the #1 trend we see is "work from home" will become much more normal.  This has serious implications for certain segments of commercial.

The other key aspect that this pandemic has brought to light is the over-leveraging of assets.  Hopefully, many will learn that you must have a manageable debt to equity ratio and also have adequate cash reserves to weather storms..