The battle for 1042 Cutler St

[theoverlook]

I just read this interesting article in the Washington Post. https://www.washingtonpost.com/nation/2021/05/01/landlord-tenant-eviction-moratorium-pandemic/?itid=mr_national_5 behind a paywall but I was able to read it by viewing in "private browsing" mode. It seems many small landlords are stuck without rent but still having bills to pay. The landlord they profile in the article is going bankrupt due to it, after building up a small portfolio as a Guyanese immigrant. What a crappy situation all around. I wonder if this is localized or is this happening in more towns and we're just now hearing about it?

[bacchi]

I just read this interesting article in the Washington Post. https://www.washingtonpost.com/nation/2021/05/01/landlord-tenant-eviction-moratorium-pandemic/?itid=mr_national_5 behind a paywall but I was able to read it by viewing in "private browsing" mode. It seems many small landlords are stuck without rent but still having bills to pay. The landlord they profile in the article is going bankrupt due to it, after building up a small portfolio as a Guyanese immigrant. What a crappy situation all around. I wonder if this is localized or is this happening in more towns and we're just now hearing about it?

It's happening everywhere. There's no question that the upstream consequences of the eviction moratorium weren't given much thought.

[clarkfan1979]

I haven't heard of this happening to anyone. When I ask my landlords friends, everyone is fine. However, we tend to buy in Class A and B neighborhoods. For those that have apartments in class C neighborhoods they claim that their tenants are paying rent with unemployment money.

[bacchi]

As an aside, the article illustrates a good reason to drive a beater to your C rentals. You have less of a chance being viewed as The Man if your car is in similar shape to your tenant's car.

[YttriumNitrate]

It seems many small landlords are stuck without rent but still having bills to pay. The landlord they profile in the article is going bankrupt due to it, after building up a small portfolio as a Guyanese immigrant. What a crappy situation all around. I wonder if this is localized or is this happening in more towns and we're just now hearing about it?

My guess is that it's hit or miss on the property level. I'm lucky in that my tenants have kept paying, but if they stopped things would have gotten tough. This article certainly highlights the importance of screening out tenants that prioritize new furniture and laptops over paying the rent.

From the article:

When Hill finally received some small unemployment payments and a four-figure stimulus check from the government, he used the money to fix the engine in his broken-down minivan, buy a little extra food, purchase some basic furniture, pay down his credit card, and surprise his daughter with a decent laptop.

[maizefolk]

The article mentions the landlord has historically had to evict a tenant every few months and has a "half dozen" homes. If we take that literally at six homes and every few months as 3, that would be one eviction per unit every year and a half.

I would have liked a little more detail on the "some small unemployment payments and a four-figure stimulus check". Unless there are things we aren't being told, the tenant should have been qualifying for the $600/week extra unemployment benefit on top of whatever NY state normally pays. Put those together and he should have been bringing in >$3,000/month.

It's a well written article. The part where the tenant was trying to teach his daughter that the landlord saw the two of them as rats was very disturbing. Convincing yourself that other people are dehumanizing you makes it so much easier to dehumanize them in turn, and that makes the activation energy to trigger violence lower and lower.

[Tyler durden]

Im sure this is happening more than we realize.

For example. My wife and I currently own 4 rentals. Closing soon on another that will be 100% STR vs our 4 LTR.

One of the long term rentals hasn't paid in 6 months. We got 2 months back rent from the state rent relief program. That was funded from the FEDS. I emailed with the same agency and have 2 more checks coming. One check to cover the 4 months rent the tenants are behind, and another to cover 2 more months of advanced rent payment.

The money is out there for struggling tenants/landlords. People need to be active in looking. I know I was.

[bacchi]

Im sure this is happening more than we realize.

For example. My wife and I currently own 4 rentals. Closing soon on another that will be 100% STR vs our 4 LTR.

One of the long term rentals hasn't paid in 6 months. We got 2 months back rent from the state rent relief program. That was funded from the FEDS. I emailed with the same agency and have 2 more checks coming. One check to cover the 4 months rent the tenants are behind, and another to cover 2 more months of advanced rent payment.

The money is out there for struggling tenants/landlords. People need to be active in looking. I know I was.

In NY, that is for the tenant, though the money does/did go directly to the landlord. If the tenant doesn't apply, the landlord gets nothing.

“Really? You’re still not going to pay ANYTHING?” he wrote after he read about the billions of government dollars being spent in rental assistance, for which his tenant never applied.

[ncornilsen]

Im sure this is happening more than we realize.

For example. My wife and I currently own 4 rentals. Closing soon on another that will be 100% STR vs our 4 LTR.

One of the long term rentals hasn't paid in 6 months. We got 2 months back rent from the state rent relief program. That was funded from the FEDS. I emailed with the same agency and have 2 more checks coming. One check to cover the 4 months rent the tenants are behind, and another to cover 2 more months of advanced rent payment.

The money is out there for struggling tenants/landlords. People need to be active in looking. I know I was.

In NY, that is for the tenant, though the money does/did go directly to the landlord. If the tenant doesn't apply, the landlord gets nothing.

“Really? You’re still not going to pay ANYTHING?” he wrote after he read about the billions of government dollars being spent in rental assistance, for which his tenant never applied.

that seems like an easily fixed, yet Major hole in the program!

[bacchi]

Im sure this is happening more than we realize.

For example. My wife and I currently own 4 rentals. Closing soon on another that will be 100% STR vs our 4 LTR.

One of the long term rentals hasn't paid in 6 months. We got 2 months back rent from the state rent relief program. That was funded from the FEDS. I emailed with the same agency and have 2 more checks coming. One check to cover the 4 months rent the tenants are behind, and another to cover 2 more months of advanced rent payment.

The money is out there for struggling tenants/landlords. People need to be active in looking. I know I was.

In NY, that is for the tenant, though the money does/did go directly to the landlord. If the tenant doesn't apply, the landlord gets nothing.

“Really? You’re still not going to pay ANYTHING?” he wrote after he read about the billions of government dollars being spent in rental assistance, for which his tenant never applied.

that seems like an easily fixed, yet Major hole in the program!

Yeah, and the landlord was obviously at odds with the tenant at that point. If the landlord was still on decent terms, he could've helped the tenant fill out the paperwork. Win-win.

[Freedomin5]

This may not be a popular opinion, but a wise person who had built up their own small real estate portfolio once told me to never be over-leveraged. Their advice was that my income from other streams needs to be enough to cover the mortgage and related expenses on the rental units I owned. They also taught me the value of having multiple income streams. And never 100% finance a rental unit as that is very risky. I feel bad for the landlord, but it sounds like this landlord took big risks, built his empire up too quickly...and ended up losing.

[Dicey]

All of our rentals are in the same huge Senior Resort Community. Not one of our tenants have missed a payment.

Seems that being on a "fixed' income is a damn good thing during a time of pandemic.

[YttriumNitrate]

And never 100% finance a rental unit as that is very risky. I feel bad for the landlord, but it sounds like this landlord took big risks, built his empire up too quickly...and ended up losing.

While this is generally good advice, in the case of the landlord profiled in the story he probably would have been in a better position if he actually had 100% financed since he could just walk away. Looking through his list of properties, it doesn't exactly look like he was taking big risks to build his empire. Rather, it seems more likely that he was methodically buying rundown properties for cash and fixing them up to be rented.

Address	Amount	Purchase Year
896 Albany	$28,400	2012
911 Strong	$66,000	2019
1036 Cutler St	$14,900	2010
1040 Cutler St	$18,500	2014
1105 Pleasant St	$27,000	2011
1345 Tenth Ave	$48,000	2012
1129 Van Velsen	$54,000	2017

Wapo:

They bought cheap homes, rehabbed them, rented them out, and then started paying property taxes that helped revive the city.

[Freedomin5]

And never 100% finance a rental unit as that is very risky. I feel bad for the landlord, but it sounds like this landlord took big risks, built his empire up too quickly...and ended up losing.

While this is generally good advice, in the case of the landlord profiled in the story he probably would have been in a better position if he actually had 100% financed since he could just walk away. Looking through his list of properties, it doesn't exactly look like he was taking big risks to build his empire. Rather, it seems more likely that he was methodically buying rundown properties for cash and fixing them up to be rented.

Address	Amount	Purchase Year
896 Albany	$28,400	2012
911 Strong	$66,000	2019
1036 Cutler St	$14,900	2010
1040 Cutler St	$18,500	2014
1105 Pleasant St	$27,000	2011
1345 Tenth Ave	$48,000	2012
1129 Van Velsen	$54,000	2017

Wapo:

They bought cheap homes, rehabbed them, rented them out, and then started paying property taxes that helped revive the city.

The article says this particular landlord “saved up a small down payment toward a $79,000 purchase price”. My interpretation was that he paid a down payment and therefore has a mortgage. It doesn’t say he put down an all cash offer. He still took risks by putting all his eggs in one basket and not having multiple income streams to help cover costs. And I don’t think he gained any love from his tenants by driving around in his Mercedes to collect rent.

It’s also interesting how the author juxtaposed this landlord’s situation against the other landlady’s situation in the same town, same neighborhood. She says, “I’ve been lucky,” she said. “I only rent to good people, and most have paid. It seems like every other landlord is going under, but I’m actually trying to invest. I’m looking to buy.” So it sounds like, even in that town, landlords can make money and run a viable business if they do their due diligence.

[YttriumNitrate]

The article says this particular landlord “saved up a small down payment toward a $79,000 purchase price”. My interpretation was that he paid a down payment and therefore has a mortgage.  It doesn’t say he put down an all cash offer.

I guess we have different reads on this article. I see this as him getting a mortgage on his first property 20 something years ago, rehabing the property the property and then buying more investment properties with the profits.

Wapo:

The house had been sold four times out of foreclosure, condemned by the city, and scheduled for demolition when Budhoo first saw it after immigrating to New York from Guyana in the early 2000s. He’d worked at a nearby pick-and-pack warehouse for $8 an hour and saved up a small down payment toward a $79,000 purchase price. He’d rewired the electricity, gutted the plumbing, installed granite countertops, and begun renting it out for up to $950 per month. Gradually those profits had paid for more distressed properties

[srad]

This may not be a popular opinion, but a wise person who had built up their own small real estate portfolio once told me to never be over-leveraged. Their advice was that my income from other streams needs to be enough to cover the mortgage and related expenses on the rental units I owned. They also taught me the value of having multiple income streams. And never 100% finance a rental unit as that is very risky. I feel bad for the landlord, but it sounds like this landlord took big risks, built his empire up too quickly...and ended up losing.

I'll agree with your buddy when starting out, but if you really want to FIRE with real estate you are going to need to have a lot of properties.  As your portfolio grows you will become more comfortable with debt and the portfolio should be able to take care of its self.  However, up until 2020, I never imagined a scenario where potentially ALL of my tenants would stop paying (FYI I only have one who is paying very late each month).  If all my tenants did stop paying, i have a ton of cash to float this, but it would hurt seeing the money go out each month.  That said, investing is risky, If you don't want risk, buy an annuity.

If the investor in this article can hold on, maybe sell the Benz and buy a 4k Corolla to float a few months.  In 5 years I'd bet he will be in a fine position to buy that Benz back.   Which I would never drive when picking up rent checks. That's just poor optics.  I have a classic beater I use while visiting my rentals (2006 Acura MDX with dents in the side panels).  Man, I need to get a truck, I have trashed that car.

Main thing i got from this article,  This is what the 1% rule buys you.

[Freedomin5]

The article says this particular landlord “saved up a small down payment toward a $79,000 purchase price”. My interpretation was that he paid a down payment and therefore has a mortgage.  It doesn’t say he put down an all cash offer.

I guess we have different reads on this article. I see this as him getting a mortgage on his first property 20 something years ago, rehabing the property the property and then buying more investment properties with the profits.

Wapo:

The house had been sold four times out of foreclosure, condemned by the city, and scheduled for demolition when Budhoo first saw it after immigrating to New York from Guyana in the early 2000s. He’d worked at a nearby pick-and-pack warehouse for $8 an hour and saved up a small down payment toward a $79,000 purchase price. He’d rewired the electricity, gutted the plumbing, installed granite countertops, and begun renting it out for up to $950 per month. Gradually those profits had paid for more distressed properties

Yes, doesn’t say with cash. Could have been enough for another down payment, or a HELOC. I guess we won’t know for sure. And while it says he rehabbed the property, the article says his tenant says he let the property fall into disrepair. I suppose there are always two sides to the story.

If all my tenants did stop paying, i have a ton of cash to float this, but it would hurt seeing the money go out each month.  That said, investing is risky, If you don't want risk, buy an annuity.

I agree. If the landlord in the article had planned it out and been prepared like you, or had selected good tenants like the landlady in the article, I don’t think there would have been an article written about him.

[theoverlook]

Good feedback. One thing I notice with articles like this is sometimes they take edge cases or people that were super risky and apply it as if everyone is subject to the same problems. Back with the 2008 crisis, it was people with multiple mortgages that cashed out several times and had no equity that were portrayed as having done "everything right" but still lost their homes. (Referring to a specific Newsweek article here, I think.)

I hope this doesn't happen more. Hopefully most landlords have more of a cushion and/or better tenants. This does seem like a particularly risky landlord combined with a particularly irresponsible tenant.

[srad]

Interesting takes.  I don't usually comment on things, especially upon political ones, but I'll bite, just this once: you fine folks are not nearly cynical enough. 

Haha, well said.    Trust me, i am,  All the media is, is entertainment.  They aren't about anything good in society they truly are all about the money. They are worse than what they portray these evil landlords to be.  Landlords provide housing, media provides divisiveness.  Politicians aren't any better.

I just wanted to add my 2 cents as to what a landlord needs to do in this environment.  Which is be able to ride a downturn for a period of time.  And if you cant do that, you shouldn't be buying a fancy car  its called delayed gratification. This is for all people, not just landlords.  I know a dentists whose terrible with money, Cant afford a 30k roof repair on his practice, yet he bought a 70k base priced Jaguar and put on an additional 30k in extras.  This dude doesn't have 30k to fix his roof but purchased a 100k car?  There are so many financially unprepared people in this world. 

[Paper Chaser]

Is mortgage forbearance not an option for this landlord? Was that discussed in the article?

[bacchi]

I just read this interesting article in the Washington Post. https://www.washingtonpost.com/nation/2021/05/01/landlord-tenant-eviction-moratorium-pandemic/?itid=mr_national_5 behind a paywall but I was able to read it by viewing in "private browsing" mode. It seems many small landlords are stuck without rent but still having bills to pay. The landlord they profile in the article is going bankrupt due to it, after building up a small portfolio as a Guyanese immigrant. What a crappy situation all around. I wonder if this is localized or is this happening in more towns and we're just now hearing about it?

It's happening everywhere. There's no question that the upstream consequences of the eviction moratorium weren't given much thought.

So it's clear, I'm not a landlord in any form or fashion.  And I sympathize with a lot of renters.  But it was immediately clear that this would have those consequences.  That was the goal.  The government deliberately forced those costs onto others so that they wouldn't have to pay for it themselves.  They didn't want to.  But they wanted to claim credit for giving out so much free cash.  It's like they say in Congress: "The only thing more fun than giving away free money to the crowds...is giving away someone else's." 

There is federal covid money for landlords. It was discussed upthread.

[ncornilsen]

I just read this interesting article in the Washington Post. https://www.washingtonpost.com/nation/2021/05/01/landlord-tenant-eviction-moratorium-pandemic/?itid=mr_national_5 behind a paywall but I was able to read it by viewing in "private browsing" mode. It seems many small landlords are stuck without rent but still having bills to pay. The landlord they profile in the article is going bankrupt due to it, after building up a small portfolio as a Guyanese immigrant. What a crappy situation all around. I wonder if this is localized or is this happening in more towns and we're just now hearing about it?

It's happening everywhere. There's no question that the upstream consequences of the eviction moratorium weren't given much thought.

So it's clear, I'm not a landlord in any form or fashion.  And I sympathize with a lot of renters.  But it was immediately clear that this would have those consequences.  That was the goal.  The government deliberately forced those costs onto others so that they wouldn't have to pay for it themselves.  They didn't want to.  But they wanted to claim credit for giving out so much free cash.  It's like they say in Congress: "The only thing more fun than giving away free money to the crowds...is giving away someone else's." 

There is federal covid money for landlords. It was discussed upthread.

But it requires the tenant to submit for it, putting the onus of work on someone who has little incentive to go through with it... so many landlords are not getting it.