June 1, 2021
Last Updated
In the news this week we discuss LA tinkering with a vacancy tax for landlords, immigration reform pushing to evict 108,000 immigrants, how A.I. is changing REI, and fun facts about landlords.
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Resources Mentioned on this Episode
https://www.dailynews.com/2019/06/19/los-angeles-wants-to-tax-landlords-for-vacant-units/
https://www.nytimes.com/2019/06/17/us/politics/public-housing-immigrants.html
https://fortune.com/longform/single-family-home-ai-algorithms/
Show Transcription:
00:00 Hey everybody. Welcome back to another episode of Rentprep for landlords. I’m your host, Eric Worral, and this is episode 265 and we are going to be talking about four recent stories in the news about how LA wants to tax landlords for a new issue that they’re dealing with out there. Uh, we also have a story coming in from the New York Times about landlords opposing Trump’s plan to evict undocumented immigrants. And we have a story coming in from fortune, uh, which actually shared in the newsletter this week, uh, about how artificial intelligence is helping one landlord gobble up an incredible amount of property in the United States. And then we also have an interesting tidbit, a statistic from MarketWatch about mom and pop landlords that you might find interesting as well when you get back to all of that right after this
00:54 1,2,3,4 ya ya ya…. Welcome to the RentPrep for landlords podcast. And now your host, Steven White and Eric Worral.
00:59 Well, first of all, I apologize for my voice a little bit course. Um, I got one on a bachelor party this weekend and, uh, I’m actually think I’m Horst though from my allergies. So I’m Cape Cod. I was a good time. It was nice out and plug a bunch of crazy guys. But um, it was a good trip. I’ve never been out to Cape Cod. It’s gorgeous. If you’ve never been, went to this cool little beach bar called the a Beachcomber, which was neat overlooking the sandy dunes. It was over the ocean. It’s pretty cool. Didn’t realize that seals get right up on the shore. They’re pretty close. And that’s why they got the great whites sweeping in. So not a lot of people in the water, but that’s enough about my random weekend. Just wanted to share cause I feel like, you know when you get out you want to share it, you know, you don’t, I’m talking about all right, well
01:43 let’s get to it. So first article that we mentioned, this one comes from the dailynews.com an opinion piece by John Phillips and it’s like Los Angeles wants to tax landlords for vacant units. So if you’ve been listening to the podcast for a bit, you know that we’ve actually already talked about this before in Vancouver where they are doing this because they’re having a problem with people buying up these like a lot of times luxury homes and apartments and they didn’t like the fact that there was sitting vacant. So they instituted this rule that you’re going to get taxed for having a vacant property if you’re a landlord. So what did they end up doing? They ended up renting out these mansions to like kids like 18 year olds, 19 year olds in college, and they’re trashing the places. Maybe I’m just assuming that way.
02:30 And so LA is looking to do the same thing, but for them they’re saying the reason being is that they estimate in LA that there is a hundred thousand vacant units but about 60,000 homeless people. So if you give every homeless person to a vacant place to live and while LA, no homeless. But the problem in the so called solution is that, uh, they’re kind of penalizing the owners of these vacant units. And it’s, uh, I’m not sure exactly how you work that cause I mean, that’s a pretty, pretty loose stat. You say there’s 100,000 vacant units, well, what do they look like? Are they high rent vacant units that somebody is waiting for the right tenant? Are they low rent? Um, just to say, you know, we’re going to move those 60,000 to a hundred thousand units and have 40,000 units left over. I mean, it seems like it’s one of those things where it’s just kind of, you know, uh, there’s probably more digging to do in that scenario.
03:24 I mean, it’s definitely a good, good pursuit, right? They’re trying to solve homelessness, but I think, uh, by just taxing landlords and then saying that they’re doing it for homeless, you know, isn’t that really a situation? Who knows? But, um, yeah, if you want to check that out, that’ll be in the show notes. Uh, maybe that’s a applicable to you. Um, let’s see. Pretty Saucy, uh, article. Definitely an opinion piece. So you can check that out.
03:49 So the next article comes from the nytimes.com. And the title says, Landlords Oppose Trump Plan to Evict Undocumented Immigrants. This is by Lola Fadulu and Zolan Kanno-Youngs.. And this was of by June 17th. So what they’re saying is that landlords and local officials across the country say White House proposal to reject undocumented immigrants from subsidized housing would display some of their most reliable tenants and add major financial strain to an already cash strapped system. So it says that this plan would essentially, um, evict as many as 108,000 people receiving benefits. And in essence, immigration enforcement to the responsibility for it saying in essence that it would be adding immigration enforcement for the responsibility of the landlord, uh, who’s already dealing with a lot of things as you know, being a landlord. So the interesting piece about this was, and I’ve heard this echo before in the Facebook group, it said that the bottom hitters are quoted, so the housing authority would bear the brunt of the expense of having to completely evict and go through the court action of having to evict these families. And then they also said that there would be on the hook to pay for that. Um, the part that I found really interesting from this story was the fact that, um, these landlords are saying that these are really good tenants for the most part because a lot of them don’t want to have an issue for unpaid rent. They don’t want to be evicted. They didn’t want to have a sheriff involved. They don’t want to see the police. So a lot of these private landlords are saying that these are really great tenants that, um, unfortunately 108,000 of them
05:25 That’s a pretty, uh, controversial, pretty, uh, pretty huge story. And there’ll be interesting to see what happens with this because you know, a 10800 families, that’s a, that’s a lot of people. So, um, we’ll, uh, we’ll, we’ll keep our thumb on this one and I’m sure this one’s gonna be coming up again in the future. So we’ll see what happens with it.
05:54 Moving to our next story here, this one’s from fortune.com actually included it in last week’s, um, uh, that just went on Tuesday’s newsletter. Uh, and what the title of this one is. It says, meet the AI landlord that’s building a single family home empire. This was written by Shawn Tully on June 21st from fortune.com. And if you’re not familiar, AI, artificial intelligence using computer systems, uh, to, uh, you know, whether it’s data mining or data modeling and figuring out, you know, what’s the best, uh, scenario or algorithms, all that stuff that all of us, you know, know a little bit about, but not enough to sound educated about.
06:34 Really interesting it said that Data science helped Amherst Holdings CEO Sean Dobson make a fortune in the housing crash. Now he’s deploying A.I. to profit from properties that most investors wouldn’t touch. So basically, uh, main street renewal is an arm of Amherst holdings or real estate investing firm with 20 billion under management. It owns or manages some 16,000 single family homes scattered across the Midwest and sunbelt. The portfolio makes Amhurst one of the biggest, fastest growing players and institutionally owned rental homes, a $45 billion subsector of the real estate industry that barely existed before the great depression or the great recession. So Sean Dobson Amherst’s CEO, is an imposing Texan data savant who dropped out of college to get into mortgage trading. A decade ago, he made a killing shorting shaky debt during the housing crash. Today he’s adding 1,000 homes a month to his empire with the help of artificial intelligence, using data modeling to make dozens of offers a day on potentially profitable houses. The Main Street homes are a $3.2 billion investment that generates around $300 million in annual rental income, but Dobson harbors far bigger ambitions: “We want to get to 1 million homes in the next 15 years or so,”.
08:00 I mean that’s pretty nuts. You figure there’s 300 something million, 330 million people in the United States and this guy wants to own 1 million homes like you’re talking about. if it was three people per family, he’s going to own 1% of the homes in the United States. That’s his goal. Of course, you know, there’s a big difference between the 16,000 single family homes at a million. Um, but it’s pretty interesting. So he’s got this algorithm, this a AI that’s helping him identify, um, single family homes that would be profitable and also allowing him to make offers on these. And I’m sure it’s probably just based on an algorithm if it meets these factors and then it crosses these boxes and, uh, all that, that it’ll, uh, get an offer. And, uh, it’s pretty crazy. I think something like this is, it’s hard for somebody like myself to wrap his mind around it.
08:50 I have some, uh, familiarity with this. Uh, you know, we work with developers for our products here at Rentprep, uh, working in marketing. I work on our websites and videos and podcasts and things like that. So I have some tech understanding, uh, but it’s pretty, uh, uh, pretty crazy to think about the fact that somebody is just essentially creating a computer program and using artificial intelligence to make himself absolutely filthy rich, uh, with real estate. So, uh, I don’t know if this is somebody who’s going to be kind of like the first guy on the frontier, the first one hit the gold rush and then a bunch of other players will, uh, kind of step in and figure this out. And maybe this will just be the norm in 10 years, or maybe not, who knows? Uh, but it’ll be interesting to see how all of this goes. And if this is something that becomes a trend that more and more people with access to this type of technology will take advantage and be able to find these deals and be able to submit so many deals based on uh, the artificial intelligence that they’re employing. So again, this will be another one that I’m sure in the future we will revisit because it’s a, it’s pretty interesting stuff if you ask me.
09:56 So the last one here, this is a from marketwatch and the title of it says Mom-and-pop landlords push investor share of home purchases to 19-year high. This is published June 23rd of 2019 as published by Andrea Riquier. And it said that More homes are being bought by investors, and their purchases are concentrated among starter homes, making it even harder for first-time buyers to break in to the housing market, according to a new analysis. So this is kind of like lines up with what their article we were just talking about where this guy’s focusing on single family homes. And some of those of course are gonna be starter homes. Ah, this says that Investors commanded 11.3% of all purchases in 2018, according to CoreLogic, a real estate data company responsible for the report. That’s the highest level since 1999, and even dwarfs activity between 2012 and 2014, when the housing market was still mired in distress and big financial institutions with deep pockets swooped in. So it’s saying that DM for starter homes, investors account for one in five transactions almost, uh, around 20%. That’s notable about recent activity is that smaller investors, not big financial institutions that are driving the uptake, large investors share has declined from 24.3% in 2013. Uh, the aftermath of the crisis to 15.8% last year. So large investors not really looking at a small starter homes, but a smaller investors are doing this and they’re doing it in droves. So investors who purchase 10 or fewer homes were responsible for 60% of transactions in 2018 up from 48% in 2013.
11:41 So this is kind of interesting because it kind of almost mirrors a the same way that you hear a lot of times that small business is where a lot of their jobs and growth comes from. It seems like small investors is where a lot of the growth in transactions, I mean to go up from 48% to 60% is pretty substantial. You’re talking probably about a one, a 40% increase, I guess 50% would have been in a 24. So yeah, it was set to correct me on my math later. Uh, but that’s pretty a pretty substantial, it says that perhaps because lower priced homes are more plentiful and metro areas that are seeing cool cooler growth. The housing markets with the greatest share of investor activity aren’t high flyers. They’re Detroit, Philadelphia, Oklahoma City, uh, and Memphis, which was, uh, been sometime known to be hot bed of single family rental, uh, boom as well.
12:30 So, uh, that’s pretty, uh, interesting. Uh, factoid. Therefore you that single family homes are booming, but it is the, the small time investors, people with 10 properties or less that are really buying ’em up. Uh, and it said that most of the activity has concentrated east of the Mississippi in lower priced areas. I also wonder if this is, you know, just more people in general are getting into real estate maybe 20, 30 years ago. Uh, it was more daunting and now with the advent of technology and, uh, you know, access to great education online and being able to, um, really, uh, take, take things into your own hands, right? That could also be a piece of it too. Maybe people are not, you know, to a trusting of the fact that they’ll have social security when they get there or they’re worried about, uh, you know, the market itself.
13:21 So they’re going from a, uh, we’re learning from a Mark Kohler, in the podcast kept talking about going from Wall Street to main street and putting your money in main street instead of Wall Street. So, uh, there’s probably just a, a, a trend as well. So I really interesting stuff. Uh, really enjoyed, uh, research and these articles for you guys this week. And again, uh, uh, feel free to give us a review on the podcast if you’re a longtime listener. I love reading those, so I would really appreciate that as well. And if you guys haven’t joined the rent prep for landlords, Facebook group, there’s a lot of great conversation going on there all the time, all this kind of stuff. So go and check that out. All right guys, until next week, have a great week. Take care.