Housing Market (& Mea Culpa)

[TheTimeTraveler]

Originally Posted by BillJohn

I know some people who bought a house for 1.5 million and then put in another 500K who then advertise the property for rent and that it sleeps 20! Why someone would do that is a mystery to me.

It's all about numbers and returns. If the numbers work then some consider it a worthwhile investment.

Personally? I don't think I would sleep very well at night.....

[garysanfran]

Originally Posted by TheTimeTraveler

It's all about numbers and returns. If the numbers work then some consider it a worthwhile investment.

Personally? I don't think I would sleep very well at night.....

It's your return on equity and potentially a major tax write off in depreciation against your earned-income while also getting to use the property (there are uhhhh, IRS restrictions).

I've owned rental property in San Francisco for 40 years. Never a problem so severe I could not handle it while 3,200 miles away. The key is great tenants (proper screening) and a good building in a great location. And a reliable stable of contacts to do repairs, is a must.

Establishing a WOW! factor upon first sight creates demand and competition when showing the units. I've worked with a lot of landlords who owned Sect. 8, etc. in marginal neighborhoods. The rent is guaranteed but the wear-and-tear is more severe because Sect. 8 people are home more often, even during non-COVID times. More tenants per/unit. Usually less educated. However, choosing and screening wisely, it's a great deal.

Short-term rental is handled differently. The ability-to-pay is not the issue since most rent is paid ahead of time. The problem becomes spotting potential behavior problems...Loud partying, unwarranted guests, pets, etc.

[TiltonBB]

GarySF. Exactly that.

I have had rentals since 1978. In many situations I did not do enough investigation of prospective tenants, and I have the court cases to prove it. I took a chance on people and sometimes (too often) I was wrong.

One other thing about section 8 is the repairs. People who are getting something for nothing seem to have very little respect for the property. One tenant locked herself out, so she poked holes in every window screen to see if any of the windows were unlocked. When the state does the annual inspection guess who has to make all the repairs to the tenant damage?

My experience has been that 90% of the section 8 tenants are scamming the system. They often work for cash so that it doesn't show up on the books and take advantage of every free government program there is.

As Howie Carr says: "The safety net has become a hammock." I couldn't agree more.

[ApS]

One issue I would never want is "sub-letting"!

[garysanfran]

For many years I owned a credit reporting agency that tracked the performance of residential and commercial renters. My screening process was beyond what most landlords could do on their own... Way beyond a credit report and a few reference checks.

One important item that does not show on a credit report, is a prior eviction, or more important...An eviction in process. This action, in New Hampshire, is called a "Landlord-Tenant Writ".

Unless there is a money judgement. Evictions aren't on your Experian, Equifax or Transunion credit reports.

Evictions are an issue of possession of property, not money. Even if it's money owed. So, because credit reports deal with monetary issues, a possession of property won't show.

After the writ-of-possession, the landlord can get a money judgement and if successful, that will show on a credit report a few months after the fact...But not as an eviction. You may not know what this public record is for.

So what we did...

The filing of an eviction complaint, is a public record. We hired a network of data-gatherers that went into every court house throughout California (and other states) from every day, to once every two weeks to gather Unlawful Detainer (eviction) complaints at the point of filing. So, we knew of an eviction "in process" before the tenant started looking for another apartment, while using his Uncle Freddy as a phony landlord reference.

Plus, the same laws that allowed banks to report your handling of debt to credit reporting agencies, our clients could report objective rental issues into our database...Good and bad....Bounced checks, property damage...Great tenant, had unauthorized pets, etc.

In San Francisco, for instance, there are approx. 12,000 Unlawful Detainer complaints filed every year. While these people are being evicted, they're looking for new places to live using fake landlord references... and we knew!

The courts had to provide us access to their files and a place to work.

A local newspaper ran a business article on us. A local TV station then ran a news story that was seen by the director of one of the local public housing authorities who then hired us to exchange data between housing agencies...So we became the screening agency for HUD, privately owned public housing (Sec. 8), and publicly owned public housing...San Francisco, Oakland, Contra Costa, Los Angeles Housing Authorities as well as thousands of conventional landlords and large property management companies.

So, there isn't a scam I have not seen or heard of. I could write a book.

I sold my company in 1998. Similar companies are still out there, including mine with an office in Tewksbury, MA.

The problem today, is that almost all of these companies purchase stale eviction data. It was expensive to gather "live" evictions. So today they purchase packaged "eviction data". However, it's packaged after judgement, so an eviction-in-process is more difficult to uncover.

I also used questions to uncover fraud during reference checking...For example...

The applicant says he's paying $1,200/month rent. I call his landlord "reference" and ask if the landlord can verify that the applicant was paying $1,000/month rent and paid on time? If the answer is yes?

"Oh...I'm so sorry. I made a mistake. The applicant says $1,200/month. Why did you confirm $1,000?" Listen to them squirm!

And if the applicant is using a phony Social Security number? Most people don't know they're geographically coded. If you come from a New England state, it begins with a 0...New Hampshire, Maine a double 00. Chicago a 3. California mostly a 5. And if you're from NY, 050-134.

So your applicant says he just arrived from Korea and gives you a SS# beginning with 580, you ask him when he was in Puerto Rico?

It was fun...

[Sue Doe-Nym]

Very interesting post, garysanfran! Most of that information is new to me. Thanks.

[Descant]

I've done evictions in small claims court where I also got a judgement for money. Unfortunately, there really wasn't much success in collecting on that. If they didn't have the money to pay the rent, they certainly didn't have the money to pay a new landlord and me. I've only had a couple of section 8 people. They worked out very well. In each case, NHHFA only paid part of the rent, tenant paid some amount that increased over time until they got off the program. No damage other than normal wear and tear. Just the way the program is supposed to work.

[Biggd]

A buddy of mine had professional rent scammers in his building. They wouldn't move out and wouldn't pay rent during Covid even though they were both working. He actually paid them a months rent to move out.

[tis]

Originally Posted by Biggd

A buddy of mine had professional rent scammers in his building. They wouldn't move out and wouldn't pay rent during Covid even though they were both working. He actually paid them a months rent to move out.

That is the problem. People who were still working took advantage!!

[gwhite13]

A late good friend of mine had a ingenious method to remove squatters back in the 70's. His buddy was a very large scary fella, he would bust in the door around dinner time, announce that he was moving in on thursday and for them to be gone on wednesday. Worked every time, only cost a door jamb. Probably too dangerous to try in these days.

[garysanfran]

Not a scam I've not heard of. I've had to step through yellow tape and over a dead body to get into one appointment at a public housing project in Oakland. Gangs shot a security guard through the walls of his office with automatic weapons about 20 mins. before I arrived.

One 92 yr. old woman told me that she and her, now deceased, husband bought a good 2-unit owner-occupied building in a good neighborhood 60 yrs. before the neighborhood changed and she got a bad actor who didn't pay his rent for almost a year. His electricity got shut-off for non-payment so, without her knowing, he cut a hole through their common wall and he tapped into the back of one of her outlets. So she paid for his electricity unkonwingly. And he tapped into her cable TV, so she paid for the cable also. I told her what to do and she got him out in two months.

I busted one of the largest Nigerian fraud rings on the west coast. A guy posed as a landlord wanting to screen people through my company. I had suspicions and found him in my database as a past tenant who had an eviction filing that had been dismissed. I knew where he was and started my own investigation. I past the results on to The Secret Service and they nailed his ass. They had been looking for him for a long time, and couldn't find him. Got him and 15 family members.

I came across a Craigslist rental fraud in the Lakes Region last year when I needed to rent a place for a month while my place on the lake was rented out. They said COVID prevented them from showing it in person. I could drive by and look at photos. I Googled-Earthed the address and saw a sign with the phone # of the apartment community, I called the manager and she told me it was a fraud.

[TheTimeTraveler]

Originally Posted by tis

That is the problem. People who were still working took advantage!!

Our tax dollars hard at work!

[TiltonBB]

Originally Posted by Biggd

A buddy of mine had professional rent scammers in his building. They wouldn't move out and wouldn't pay rent during Covid even though they were both working. He actually paid them a months rent to move out.

A friend bought a nice single family home but there were renters (well, tenants who didn't pay) still living there. He stopped by the house and told them he had bought the house and they needed to leave. They laughed at him so the next day he hired a lawyer.

The lawyer told him to offer them $5,000 to leave. He said "You didn't understand me. I now own the house" The lawyer said yes, I understand you but if you want to move into the house in the near future go pay the "tenant" (It usually takes about 4 months to get rid of deadbeat tenants and you never collect the back rent.)

He did, and they left.

[tis]

Originally Posted by TiltonBB

A friend bought a nice single family home but there were renters (well, tenants who didn't pay) still living there. He stopped by the house and told them he had bought the house and they needed to leave. They laughed at him so the next day he hired a lawyer.

The lawyer told him to offer them $5,000 to leave. He said "You didn't understand me. I now own the house" The lawyer said yes, I understand you but if you want to move into the house in the near future go pay the "tenant" (It usually takes about 4 months to get rid of deadbeat tenants and you never collect the back rent.)

He did, and they left.

Pretty sad isn't it how twisted this country has become.

[MAXUM]

Yes it is considering all we hear on the news these days is due to job losses, the pandemic and so on that renters should be able to live rent free. There is little if any concern about the owner, whether that be a business, an investment trust or an individual. Why are they any different than the renters? Why should they get screwed? The general consensus seems to be that they can "afford" it, when in reality many owners, or investors are no different than the renters, just average every day folks trying to carve out a living.

[tis]

Originally Posted by MAXUM

Yes it is considering all we hear on the news these days is due to job losses, the pandemic and so on that renters should be able to live rent free. There is little if any concern about the owner, whether that be a business, an investment trust or an individual. Why are they any different than the renters? Why should they get screwed? The general consensus seems to be that they can "afford" it, when in reality many owners, or investors are no different than the renters, just average every day folks trying to carve out a living.

Exactly! Most people that rent apartments do it for a reason not for fun.

[Biggd]

Originally Posted by TiltonBB

A friend bought a nice single family home but there were renters (well, tenants who didn't pay) still living there. He stopped by the house and told them he had bought the house and they needed to leave. They laughed at him so the next day he hired a lawyer.

The lawyer told him to offer them $5,000 to leave. He said "You didn't understand me. I now own the house" The lawyer said yes, I understand you but if you want to move into the house in the near future go pay the "tenant" (It usually takes about 4 months to get rid of deadbeat tenants and you never collect the back rent.)

He did, and they left.

That's a good lawyer! Most would take as much money from you first and after they sucked you dry they would tell you this.
I bought a Mobil franchise back in the 90's and when I brought the 2" thick lease to my lawyer he laughed.
He said, "you're going to pay me a lot of money to read this and then I'm going to tell you not to sign it". "These leases are written by teams of lawyers so the company never loses".
It's all about cost analysis verses risk. So I bit the bullet and signed it.

[Dad207]

Originally Posted by TiltonBB

A friend bought a nice single family home but there were renters (well, tenants who didn't pay) still living there. He stopped by the house and told them he had bought the house and they needed to leave. They laughed at him so the next day he hired a lawyer.

The lawyer told him to offer them $5,000 to leave. He said "You didn't understand me. I now own the house" The lawyer said yes, I understand you but if you want to move into the house in the near future go pay the "tenant" (It usually takes about 4 months to get rid of deadbeat tenants and you never collect the back rent.)

He did, and they left.

I am a business and real estate lawyer and I have given similar advice before. Evictions are messy and expensive (though less than $5,000), a related issue is that a bad tenant will trash your place before they leave. You may have a security deposit, but that won't cover the damage and going after a dead-beat tenant for cash (if they had money, they'd pay the rent) is useless. Better to pay them to go away and not trash the place. Most folks pay if they can, a few, are just plain deadbeats. Pay the tenant to go away, often cheaper than the lawyer.

[garysanfran]

Although fiction, the movie "Pacific Heights" is a real example of dealing with a bad tenant.

When screening an applicant, you are trying to determine two goals. Establishing their ability to pay the rent, and, much more difficult, trying to spot behavioral problems.

Financial capability is easily achieved by checking employment, pay stubs, bank records, credit reports, etc. It's usually a well papered trail you follow to a conclusion.

Behavior is much more difficult. You have to interpolate data, i.e. - read between the lines. A current landlord could lie to get rid of a problem. During an interview, almost anyone can behave well for a few minutes.