All Forum Posts by: Rich Lennon

@Greg M.  I was a bit taken aback.  To Nationalize is to transfer from private to state control.  This is 100% what happened.  If you are not sure of that, go try to sell one of your rentals to an owner occupied.  Or try to evict a tenant who is fully employed and has not paid rent since prior to the pandemic.  A tenant that is just gaming the system.  They are rare, but they are real.  You do not control that asset, the state does.  They will let you know when you can have it back.

@Greg M. Also, it is our obligation to complain, so that it does not BECOME no evictions ever.  HEROES Act is currently passed the House with a one year no evictions ban from date of ratification (page 962) .  Likely some form of the bill will pass into law in mid June.  Fingers crossed cooler heads prevail.  If this clause lasts, by June 2021, 14 months will have passed since  evictions were possible locally.  Although there is some wording about evictions can take place, the threshold is extremely low.  Verbal notification type of threshold.  Local courts will likely err on the side of no eviction if there is any doubt.  How long is to long?  I say this because I think it is important to contact our Senators, Governors, City Counselors and Congressmen/Congresswomen.   This is really scary stuff.  Stuff that will ruin entrepreneurs lives.  

@Scott Mac Fair point about New Orleans.  The government though has not shut off a fairly small part of one city, this is wide spread.  Tough for me to accept what the "common good" is.  Government is picking winners and losers, it is not allowing the free market to exist.

@Joe Splitrock Yes, this seems to be a violation of the Fifth Amendment. Two quick points:  1)  Anyone who has been a landlord knows that a tenant who is more than 2 months behind is almost never going to catch up.  It is a shame, but true.  2). Will they reimburse the equity I will lose in the asset from the today until the time I am permitted to sell the property?  My guess is 100% no.  :). Also, that is awesome that the governor of what I assume to be South Dakota made that stance.  I will note though that the HEROES Act would include South Dakota.

@Bjorn Ahlblad Yes, thank you.  This must be added to the risk associated to this asset class moving forward.

@Stephen Glover That might be the ultimate answer.  No federally backed anything.  

My observation is that this increases the risk, in this specific asset class, in this specific way, and will need to be calculated moving forward of a landlords business model.  100 free and clear used to be the goal.  Now I am reconsidering that.

I am still at a loss to understand how the government has gotten away with Nationalizing my SFH rental portfolio in the blink of an eye. When Donald Trump announced that there would be no evictions on any federally backed loans, he essentially took my assets. Yes, only a third of the mortgages are federally backed, but it empowered local government to follow suit. All local governments in Richmond Va will not take eviction cases. By virtue of doing nothing I cannot remove a tenant from my property. As a landlord I have no recourse. Effectively seeding the asset to the Federal Government.

Now I want to make something REALLY clear.  If you throw out a tenant during a pandemic because they lost their jobs, you are not a good person.  Landlords have a responsibility to be good citizens.  They are business people and had better have planned for tough times.  I have a large portfolio and my collections are at 96%.  Why?  Because we communicate with the tenants, and generally speaking ,most people want to do the right thing on their own.  They don't need the government to regulate it for them. 

Tip:  We bought six rolls of toilet paper for each of our tenants and delivered it to their homes in a gift bag with the hand written message "We are all in this together, if there is anything we can do to help let us know".  We had an AMAZING response!!  People before profit!!

What if I want to sell my asset though?  What if I believe that the real estate market today is the highest it will be for 8 years?  What if my kids need to go to college during those years?  Or I want to retire and cash out?  I cannot remove any of the tenants as there leases expire for what will likely be 6-9 months.  In that time the world will have changed.  No one can be certain what the world will look like at that time, although my guess is not better.  The government stepped in VERY QUICKLY and took control over millions of dollars of assets that I am still responsible for.  

If in times of crisis the government is willing to take this asset class under it's own control, that risk has to be accounted for moving forward in this industry.  Why work ten years to build a portfolio if it won't be there for you when you need it the most?  I fear this impulsive political decision will have a long lasting impact on the landlord industry.  The cycle I built my portfolio during (post 2008) the old grey hairs urged young investors to watch out for the banks.  Be weary of debt (good advice).  The next cycle, old grey hairs such as myself, will warn young investors that rentals have a new risk previously unimagined.  The government can Nationalize your portfolio over night, and there is nothing you can do about it.

I just thought I would throw in my two cents.

We can hope and prey for an inflationary period.  The real risk is deflation.  Stimulus money that is being given out is currently being spent on necessities.  Rent, Utilities, Food etc.  Thus it does not contribute to inflation. The fed has opened up an "infinite balance sheet".  Whatever the heck that really means.  

Liquidity of the banks is going to be a real problem soon. This will effect demand for home sales. Commercial real estate will likely be the big loser when all is said and done, but that transfers to a liquidity crisis for banks to loan to SFH. If a commercial real estate asset loses 20% of it's equity there is effectively no margin for the banks. Banks are regulated by the government on the debt ratios they can have. They will not have money to lend sooner rather than later (enter infinite balance sheet comment here as well). Demand will be hit on two fronts, unemployment and bank liquidity.

Foreclosures will not hit the market until summer of 2021 in my opinion.  The government will put together programs, see HEROE's Act, to push back foreclosures until winter 2020 and then government will will need 6 months to get through all the backlog that has piled up.

This is not a housing crisis like 2008.  This is an unemployment and liquidity crisis.  Real Estate will still be effected, but more to the tune of 15% correction vs 25% in 2008.

We are going to be hosting a class on how to hire and manage virtual assistants in your real estate business as we have over 7 we work with currently and have worked with them for years. This event is free to attend. If you sign up before March 2, you will be entered for a chance to win a $100 gift card and also will be entered for a chance to win the special grand prize to be announced at the event. 

Here is the link to sign up: http://bit.ly/rvavateam

Hope to see you there!

We are hosting a Free Real Estate Investor Meeting on January 12, 2019. We are teaching how to get free leads and will be giving out tangible gifts that will help you start or shore up your real estate investing career. Plus, if you sign up at this link http://bit.ly/11219meeting by January 6, 2019, you will be entered to win a $100 gift card. Start 2019 off right by networking and learning foundational real estate investing.

Location: Best Western Plus Governor's Inn - Governor's Room, 9826 Midlothian Turnpike, Richmond, VA 23235

Date and Time: Saturday, January 12, 2019 from 8:30am to 10:00am

We are hosting a Free Real Estate Investor Meeting on January 12, 2019. We are teaching how to get free leads and will be giving out tangible gifts that will help you start or shore up your real estate investing career. Plus, if you sign up at this link http://bit.ly/11219meeting by January 6, 2019, you will be entered to win a $100 gift card. Start 2019 off right by networking and learning foundational real estate investing.

Location: Best Western Plus Governor's Inn - Governor's Room, 9826 Midlothian Turnpike, Richmond, VA 23235

Date and Time: Saturday, January 12, 2019 from 8:30am to 10:00am

Seems you are on the right track.  I would agree, leverage is your friend.  

Richmond, like most of the country, is probably close to the top of the cycle so be careful with buy and holds at the moment.  Personally, I am putting very few homes into my rental portfolio, and actually selling some of the ones I own.

The way to find deals in Richmond is marketing. It is extremely hard to find a deal off the MLS.

Join a local meetup group as soon as you can. The two bigger ones in Richmond are REIA and RING at meetup.com. Hope that helps, best of luck!!

I know the market pretty well.  What can I do to help?

Ethan,

1)  Sell the property to me and I will deal with it :)      (ok, shameless plug)

2)  Cash for keys has been the best thing to work for me.

3)  It will be tough to get a lender if there is a tenant in place.  Unless you have a buyer that will buy with there own money it will be hard to wholesale this property.  For example, it is doubtful a hard money lender will loan with a tenant in the property.

4)  Tell landlord to file paperwork with city.  Drive her/him to courthouse if necessary.  It will take a 30 day notice, then you will get a court date, then you will get possession, then a sheriff will come to move out squatter.  About 2 month process.

5) call me, I have dealt with Richmond city a few times on this. 

Hope that helps

Travis,

Those are some great questions.  I  have a few thoughts.

1) It sounds like you should spend some time looking into ways to invest tax free. Self directed Roth IRA's, Coverdell's and HSA's are all amazing vehicles in which to invest tax free.

2)  I have bought, sold and created notes.  Buying them in today's market is difficult.  There are large hedge funds that are buying them in bulk and any scraps that fall off the table there is a lot of competition for.  Second position notes can be lucrative, but are very time consuming and are hit and miss.  Creating notes using seller financing is a great way to get a good yield.

3)  I looked hard at crowd funding for awhile.  Ultimately I thought the platforms were to new to predict the long term results.  I have never though invested in this manner directly.

4)  Cap rates for 20% are definitely possible in the Richmond market.  It takes a considerable amount of time to find them though, as competition from other investors is very high at the moment.

5)  I typically try to invest with infinite return.  If I have no money in the deal I can buy as many properties as I can find.

6)  The best position at the table for a real estate investment is to be the money.  It is absolutely the easiest, and if you can learn how to do it tax free, legally :), the yield is better than owning rentals.

Congratulations on the health of your wife.  A scare like you and your wife experienced is a reminder to us all that life is to short.  Obtaining financial freedom allows us to spend time with the ones we love while we can.

I bought 40 houses in the Richmond market in 2015, and am trying to get that number again this year.  If you ever want to have a cup of coffee let me know.