The Pendulum has Swung too far!
As we move through life, it has become more and more apparent to me that there is very seldom an absolute in all situations and oftentimes the answers lie somewhere in the middle. Is eating pizza bad? Well it depends how often you eat it and what the ingredients are…. Is conflict with your loved ones bad? Not necessarily, tough conversations are required at times to share feelings and required information which is a needed ingredient for growth and learning, however if that is ALL you do, then likely isn’t going to last.
The topic that I wanted to write about today is about my experience as a landlord in Maine and the challenges with some of the current processes. Let’s start by going through a fairly recent example of a situation where we had a man in his 40’s living in a 2 bedroom apartment with a roomate. This individual had a number of different jobs over the few years that we rented the apartment to him but during the Covid Pandemic he was receiving rent payments from the government and then worked with other agencies to get assistance with rent payments. Now did this individual receive these funds because he NEEDED it? I would have to suggest that he received the funds and requested them more because they were available and not because they were NEEDED (Side thought) and when these funds dried up, so did my rent checks. After an inspection it became obvious that the apartment had become a rooming house that you could barely walk through from the clutter, and there happened to be straw on the porch where they decided to house an entire Rabbit family (or 10 families). So let’s start with the eviction process first….. As a landlord that has an LLC we are required to utilize attorney’s expertise at $200-$400/hr yet the tenant receives FREE representation? The courts are backed up so to even get from the start of eviction to obtaining posession of our own asset takes minimum 2–3 months at which time there is seldom rent being paid. Once this negligent tenant is finally removed from the property, we typically are left with thousands of $$$ in damage in addition to the responsibility of taking all of the tenants worthless garbage and leftovers to the dump and footing the bill. Well doesn’t the tenant have any negative implications from this poor behavior? NONE. The tenant can then apply to another apartment and repeat the process again and again costing landlords incredible amounts of money that would otherwise be used for upgrades, improvements and additional acquisitions and builds helping with the current supply issue. And what’s worse is that as a hard working tax paying contributor, where does this rent subsidy money come from? ME and the other tax payers. And what are we teaching people that perhaps don’t have the skills or incentive to do the right things? Why is it that landlords are left holding the expenses? Growing up, if someone was on unemployment, the checks were meant to bridge a gap and if there was no proof of you hunting down employment, the checks stopped coming! Accountability! How can we expect someone to work full time when the same individual can obtain rent, cell phone, food stamps, free tuition etc. providing the same if not higher quality of life but without having to work? We have the technology to understand who is getting these subsidy checks for rent, or for food and we also have the data to understand who is hiring for work? Let’s connect these together and help improve the lives of others through training and hard work. Free handouts without accountability is far from a sustainable model and has proven time and again NOT to work, yet we continue to do the same thing. Why is it that someone can leave an apartment that is owned and kept by hard working investors trying to get ahead in the condition that is shown, and then when they ask for more subsidy money for the next apartment there are no questions asked? Shouldn’t they have to check on the previous landlord if they received tax payer money in the past before they are accepted into the program again? Wouldn’t this be a deterrent for repeat offenders? What about routine inspections with guidance and training on life skills?
The biggest mistake we can make as a society is removing accountability as this is what is required for real change and growth. Some of the more recent “Ideas” that I have been hearing from folks is that they are suggesting that requiring income information from potential tenants is breaching their privacy? So as a landlord we aren’t able to get information about whether or not a potential tenant can afford the apartment? How ridiculous can things get. If you rent a Sailboat that you purchased with your own hard earned money and someone wanted to rent it but they crashed the previous 10 sailboats that they rented, would you rent to them? It’s time that we allow landlords to obtain possession of their own assets once a breach of contract has been proven and so often these agreements are relatively simple in nature. You see the living arrangement that the landlord is renting and agree to live there and keep it clean and tidy and in return pay a set fee monthly?
Change and growth is often triggered by pain! Sitting in the discomfort of being broke was the fuel that I needed in my life to figure out what I needed to learn and what actions I needed to take to NOT BE BROKE! The discomfort of a marriage that wasn’t working was the fuel that I needed to be able to learn and take the necessary actions to change the way that I showed up in my marriage. If there is no accountability and we as a society remove all of the pain and discomfort, we are also removing the fuel for people to make change! When the pain of staying the same is worse than the pain of change…we make some changes.
Now don’t get me wrong, I know that there are also landlords that take full advantage of the low income situation and section 8 specifically and this can be addressed without painting every landlord with the same brush. If the city or state is subsidizing rent and spending tax dollars, then they should be able to inspect and hold landlords accountable as well. Where I believe the line is crossed is when there is no contribution from the city or state but yet they want to manage the price points, the ability to use as short term or long term rental, when many of these decision makers for policy have never attempted to take their hard earned capital and purchase homes or spaces to rent to others for profit. The process similar to anything is that until you attempt to do it yourself, it’s difficult to understand the challenges. In many cases, the margin for profitibility is very slim and when the investor is left with all of the additional costs associated with clean-up and eviction and lost rent, they can end up with negative cash flow and therefore nothing left to re-invest? And we continue to talk about the challenge with supply? These things don’t go together.
Perhaps having another look at what is fair in addition to what will perhaps deter or eliminate repeat offenders costing this country and the tax payers MILLIONS of dollars annually. The federal government spent $90 Billion dollars in housing assistance in 2021 and so if there is a portion of this spending that is being wasted, instead of adding a layer of accountability so that these individuals can grow and learn new skills so that there is an end game of being self sufficient at some point reducing this spend annually would be worth the effort! Why not provide incentive programs for those that can prove that they are putting in hours at work? As an example, perhaps there is a single mother working 40 hours a week to get ahead and to reward this behavior we provide this individual with a bonus of $400/month? Isn’t this better than paying 5X that amount for someone who has decided not to work at all and receive 100% of the rent as subsidy?
So that is my little rant on the challenges that are being faced from the side of the investor, would love to hear some additional perspectives on this topic. We have a supply issue! So let’s work to make it easier to build and invest in real estate. Let’s work towards accountability for those who are using government funds to bridge a gap! We all need HELP sometimes for sure, however these programs were never meant to be long term solutions and yet more often these programs are becoming generational expectations.
