All Forum Posts by: Michael Gansberg

Thank you @Greg M. and @Bjorn Ahlblad - I see that lawsuit now(I linked it below.) I spoke to an attorney an hour ago, I'll continue to research before deciding whether to move ahead. 

https://therealdeal.com/2020/0...

For those out of NY State, feel free to weigh in. Cuomo has extended the eviction ban, which in my layman's opinion is a public taking of private property, usually requiring the process of eminent domain. I understand the need for the eviction ban, but what I don't understand is why the brunt of it falls on such a small subset of the population. 

In NY State, Governor Cuomo banned evictions for about 6 months(with one more month to go, unless it's extended further.) Cuomo has taken the landlord's capital(in the form of rental housing) by government order, with no promise or suggestion of repayment. I have emailed Cuomo's office about this, and only gotten a form response about where I may obtain loans to help(loans which of course need to be paid back, while the back rent will never be paid back.) I am sure that if the government broke into the checking accounts of hedge fund managers(or other people generally richer than I) and appropriated those funds to pay the rent of people who are unable/unwilling, the public uproar would be palpable. But when the government does the same to landlords, it seems the public response has been...crickets?

At present(and since March 2020,) my tenants owe me back rent in the amount of almost $100,000. All the tenants in what I'll call the "Platinum Class," or those owing me $5k or more, haven't yet sent a "thank you" note to me for providing them with free housing. The tenants in the Gold and Silver Classes(owing less but still quite a bit) also have yet to thank me. 

So I have finally taken the plunge and contacted an attorney about a potential class action suit against NY State. Which brings me to the initial question- am I a callous landlord? Or am I in the right?

(please note- let's avoid Democrat v. Republican discussions here, reasonable people can find fault on both sides and this is about the world we actually live in, not the world we'd like to live in.) 

@Matthew Ruderman - I suggest finding a city that has these attributes.

1. Growing population, excellent services, and businesses and institutions with staying power, like hospitals and universities. I know, I know, COVID-19, blah, blah, but one day that too will be gone, and colleges and hospitals will still be standing. Will strip malls be OK? Who knows.

2. Local government that is not too overbearing. Governments that force investors to jump through hoops in an effort to try to chase away investors and legislate their way to a higher proportion of owner-occupied housing are to be avoided. Troy, NY has recently become guilty of this infraction. Find areas governed with policies more laissez-faire than jeez, get-outta-my-hair. 

3. Proximity to you. Closer is better. If you buy something across the country, you really have to trust management. If you buy something within a two hour commute, you can drop in unannounced and text management saying, "hey, I'm next to the property, got a minute?" If management knows you can drop in at any time, they'll be a bit more on their toes. Now- once you trust management, being across the country from them may be OK. But when you're just starting out, trusting management is gonna get you clobbered, most of the time. 

MG

@Phil Wells - I take your point on future pandemics. But we've had pandemics in the past which have been much more deadly than COVID-19 (from WaPo's site, here are a few from the past century: 1918 flu, 50 million deaths. Asian flu('57-58), 1 million deaths. Hong Kong flu, ('68-70,) 1 million deaths. AIDS, 1981-present: 35 millions deaths.) Plus swine flu, Ebola, etc. And don't forget the seasonal flu which kills 30k-60k Americans each year, I think? 

Through all of that, urbanization has continued. When you're in the middle of something, it always feels like "This time, it's different." This time is no different- we'll get through it and people will continue to flock to cities. Just my opinion. 

@Phil Wells - my wife and I have been discussing this quite a bit lately. We're NYC residents, but we also live on a farm that's somewhat commutable to NYC. Lately, we've spent all our time on the farm. But- I can tell you with certainty that people will move out of cities. I can tell you with equal certainty that other people(and sometimes the same people!) will move back into cities. 

The trend toward urbanization(I'm defining that trend as the rate of population increase of the cities being greater than the rate of population increase of rural areas) has persisted for at least a century, and likely many centuries. COVID-19 may cause a hiccup in that trend, but what about when there's a vaccine? Or when the world has some measure of herd immunity? Or when there's an effective treatment? One or all of these things will happen, and then COVID will recede into our collective memories.

If you're focused on near-term questions, my top question is whether we'll have a recession or a depression. Oddly, I've noticed housing demand has remained quite robust, as has demand for equities(as evidenced by reasonably strong stock prices.) From those data points alone, it appears to me that the typical investor is more sanguine about the future than I am. Though I have moderate levels of concern, I find others' lack of concern reassuring. I wonder if I'm wrong to trust in the wisdom of crowds?

MG 

@Nikki Closser - thank you for drawing attention to this. I'm a NY State investor, we're having similar governmental issues here. I expected the vast majority of tenants to stop paying when they heard evictions were put on hold(first until June, now until August.) The reality has been that the vast majority of residents are still paying(while some people can't, and some are just being slimy, but the 'slimy' group is quite a small one.) 

I think real estate investors, by necessity, lean toward the cynical end of the spectrum. We may think that if tenants needn't pay, why would they? But I've underestimated people's humanity. They know that bills are due for them, and for the property owners as well, and in large part they are doing the right thing. 

For the tenants who have lost their jobs and truly can't pay in full, I will be nice. But let me assure you- judgment day will come for the tenants in the 'slimy' category. Nobody likes moving, or being told to move, and that will be the ultimate fate of those seeking undue personal benefit from this national tragedy. 

What I'm doing now is optimizing operations in as many ways as possible, keeping tenants happy in as many ways as possible, and doing the same for management. In other words- business as usual. If agitating for political change makes you feel better, then do it, but you'll likely be better off focusing on your business and doing whatever you can to keep a cool head.

I've taken to planting dahlias, tomatoes, watermelon, and carrots. I'm also learning animation, it's pretty chill. Starting to dip my toe into programming too.

MG

@Craig Hormes - my experience with Section 8 has been poor, overall. New residents come with inspections, and I've never passed a Section 8 inspection. Usually, they tell me to fix 10-20 things, which I of course would do.

Then one year later, though I or management have not been in the unit except to make tenant-requested repairs, the next inspection rolls around. I've never passed a second Section 8 inspection either. Magically, another 10-20 things need to be repaired, and it's always my responsibility. Where were these issues the year before? How did these things break- by magic? Divine intervention? No- the tenants did it, but the owner pays for it.

You'll often hear that rent from Section 8 is guaranteed. This is true, until it isn't, which is another way of saying it isn't true. My general experience with Section 8 stopping payments has been that the resident skips a recertification meeting, causing their assistance to be stopped. 

The absolute worst version of Section 8 is when Sec 8 pays part of the rent, and the resident "pays" the rest. When you're trapped in this situation, you have two entities to collect rent from and make happy- the resident and the government. This is, quite simply, hel* on earth. My two cents!

MG

Hi @Cathie Lazarus - congrats on the beginning of your journey. I'd skip the turnkey companies, what's good for them generally isn't good for you. Next, don't let fear of not having the best management keep you from your goals. You may have to go through several managers before finding one worth their salt. Management is very challenging work, and it's not for everyone. Don't think of that as money lost- think of it as money well spent putting together a good team so you can scale effectively in the future. 

I view syndication somewhat like a REIT(Real Estate Investment Trust) without as many guardrails. The players are less tested, the reporting requirements less rigorous- so the risks are higher. I'm not certain that data exists to suggest that the extra reward of investing in syndications is commensurate with the extra risk(as compared to a REIT.) Without evidence beyond the anecdotal, I don't see how anyone justifies a passive syndication investment.

You should just go buy a house with the assumption that you'll be able to obtain good management. Once in contract, interview several managers(winnow the field by checking reviews and references first, then do in-person interviews for everyone who remains.) Management will be the primary contact point for your residents in the future. They should be pleasant and competent- in my experience, nice managers are more effective than the battleaxes.

MG

@Wesley W. this is a strange turn of events, isn't it? Anyone with eviction experience in TN besides OP care to weigh in? I'm still at about 60 days from start(service of notice) to finish(booting their a$$e$ out the door) of an eviction, though more difficult cases can run into 70-75 days. That's in NY State by the way.

Anyone know happened to John Hickey? Is he OK? I followed his posts closely, I'm a bit worried- it appears he closed his account.