Podcast 321: How Much More Can Mom & Pop Landlords Take?

Mom & Pop landlords haven’t seen much sympathy lately other than a few forbearance options here and there. With eviction moratoriums still in place for a few states, landlords are finding it harder to keep up with payments on their rentals, let alone their own family homes.

In the meantime, unnecessary tenant requests are on the rise like requesting a new stove connection that’s working just fine.

Podcast host, Andrew Schultz, talks about all this and more including a tenant story that made his father-in-law laugh so hard he almost fell out of his chair! Let’s just say, it included a frying pan and a very angry tenant. Listen to the podcast below!

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Show Transcription:

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 321. And I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about mom and pop landlords and the effects of an eviction freeze, how to handle tenant reference requests, and the special feet on the street segment. We’ll get to that right after this.

Voice Over: (00:23)
Welcome to the RentPrep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:28)
This week, I’d like to dedicate the feet on the street segment to the memory of Dennis Jazz. We have a man who I didn’t realize meant so much to me until it was too late.

Voice Over: (00:40)
Feet on the street. Real stories from real property managers.

Andrew Schultz: (00:48)
Dennis was old school and never owned a single piece of investment real estate in his entire life. In fact, the only real estate he owned was his personal home of 30 plus years. A modest home in the Buffalo suburbs that he shared with his loving wife and beautiful daughter. Dennis worked most of his life as a skilled maintenance technician for a local hotelier, and always had dozen-plus projects that he was tinkering with around his home, the home that he maintained perfectly, but would always be a work in progress as he tinkered and toiled. Whenever I’d have a chance to stop at the perfectly maintained home with the beautiful daughter, we’d always get to catch up and share stories from our work. Normally we talked shop costs of materials, rising, the lack of skilled labor in the workplace, how our various projects were coming along, stuff like that.

Andrew Schultz: (01:35)
Dennis was able to retire earlier this year but always wanted to hear what was new and exciting in my work. And always wanting to show off his progress on whatever his project as you are, was the pride that Dennis had in the work that he shared for others, as well as the pride he took in watching as my business grew, and my career unfolded really showed just how selfless he was. One of the last exciting bits of news that I was able to share with Dennis, what does that I’d been asked to host the Rent Prep for Landlords podcast, Dennis, wasn’t a tech-savvy man. In fact, I don’t think he had an ATM card, but I could see the pride in his eyes as I told him about it. Despite the fact that he had no idea what a podcast was, had never heard one and wouldn’t know where to start, even if you wanted to.

Andrew Schultz: (02:19)
So on the days that I did get to catch up with Dennis, occasionally I’d have a really interesting story from something that had happened to me at work or whatever the case may be. This particular story made Dennis laugh harder than I’d ever seen him laugh before. I was reminded of the story in the last couple of days, and I feel that it’s only appropriate to share it here and now with all of you in his memory. So this is the story about how I got chased out of a home by a woman with a frying pan. So I was in the city of Buffalo and I had set up a self-inspection on a property for an out-of-town client. So I was basically going to look at the property on behalf of the client. And typically speaking, when I do one of these self inspects, I take a ton of photos so that I can send it to the client so they can get a feel for what it is that I’m seeing.

Andrew Schultz: (03:07)
When I go through a property, this particular property was a duplex, a two-unit property in the city of Buffalo that was being rented by Burmese family both upstairs and downstairs where the same Burmese family. And I talked to the listing agent and he explained to me that they don’t really speak English, which wasn’t a huge deal for me because we’ve had Burmese tenants in the past. And normally I’m able to convey what I need to convey, you know, using pantomime or whatever the case may be. And worst-case scenario, if my client was to purchase the property, we do have access to someone who knows how to translate for me. So it’s not the end of the world for us to have Burmese tenants where there’s a little bit of a language barrier. So I go to the property to do myself inspect and I go through the upstairs apartment and everything went fine.

Andrew Schultz: (03:54)
I was able to pantomime for the occupant that I needed to take photos of each room and they were able to tell me, okay, yes, that’s fine. No issue. I walked through the entire upper unit, got photos of the bedrooms, the bathroom, the kitchen, living-dining, the whole shot. I went up into the attic and did the same. I went down into the basement, took my photos of various mechanicals and power panels and things like that. And then I went to the lower unit to finish up what I needed to finish up as far as photos in that apartment. So I’m let into the apartment by one of the occupants who is Burmese and does not have any real English knowledge. So we’re dealing with the language barrier and I’m explaining to her via pantomime that I need to walk through the apartment and take pictures of each room.

Andrew Schultz: (04:37)
And she nods yes. And says, okay, okay. So I take that to mean that, okay, we’re on the same page. She understands what I need to do. As I’m walking through the apartment, taking photos, I opened a door to, I think it was probably the bathroom I was about to take photos of. And all of a sudden I hear clanging in the kitchen where the woman had been standing, hear her screaming and then turn just in time to see her coming at me with a cast-iron frying pan. So obviously I run out the front door and hop in my car and this woman is on fire, screaming at me from the front porch. Obviously I don’t understand what she’s trying to say to me cause I don’t speak Burmese. And this is the point where our language barrier was not something that I could overcome.

Andrew Schultz: (05:18)
So eventually I wound up leaving the property and the list agent calls me maybe 20 minutes later and says, or asks what happened because the tenant called and was screaming at him. And obviously he didn’t speak Burmese either. So there was a language barrier there. And I explained to him, look, I don’t understand what happened. I thought that I had conveyed what I was trying to do to the woman. And she seemed to understand. And then all of a sudden she chased me out of that house with a frying pan and the agent and I kind of shared a good laugh about it. And he said that he would try to work with a translator in the future for these showings and things like that. But so there you have it. That’s the story of how I was chased out of a home by a woman with a frying pan.

Andrew Schultz: (06:00)
So ultimately my client did not wind up putting an offer in on that property, believe it or not. So I guess a little moral to that story. If there is one is always make sure that everyone is on the same page before you start snapping photos inside of an apartment and worst-case scenario. If you’re looking at a property and there’s a language barrier, make sure that you are on the same page, get a translator or whatever you have to do to make sure that you don’t get chased out of a house by a woman with a frying pan. So there you have it, everyone. Dennis, this one’s for you. All right, let’s jump right into our, into new segment here. Our article today comes from Forbes. This was published on July 15th, 2020. Title of this article is What An ‘Eviction Freeze’ Means For Mom And Pop Landlords. This is actually an editorial and it’s written by Robert Farrington, who’s a senior contributor.

Andrew Schultz: (06:48)
Beginning of the article talks quite a bit about unemployment numbers and things like that. I want to jump down towards the middle of the article. This section starts with the problem with freezing evictions and I’ll be jumping around the article a little bit here, putting a temporary hold on. Eviction sounds good. In theory, pausing evictions does not get the rent paid, but it does ensure that Americans impacted by the coronavirus are not suddenly homeless and know the rent is still going to be due. It simply becomes a question of when it’s going to be due and if it can be paid, none of the current measures, forgive rent. The problem with pausing evictions is that not all landlords are giant corporations with deep pockets. According to data from the U.S. Census Bureau around 22.7 million units in 16.7 million properties were owned by individual investors nationwide at last count, compared to 25.8 million units owned by businesses, unlike businesses that are more likely to own giant apartment complex as a multi-family units, individual investors are more likely to own single-family homes or duplexes, many own only one or two units as a strategy to help cover some of their living expenses during their working years or in retirement.

Andrew Schultz: (07:59)
Further many real estate landlords do have mortgages on properties that they have chosen to invest in and operate. In many cases, the rent payments barely covered the mortgage at all. Let alone leave enough leftover to cover rent payments for months on end, when rent is not being paid, it’s simply hurting others. The government is basically asking mom and pop landlords across the country to subsidize their tenants. Unlike government stimulus checks, this stimulus is coming directly from the pockets of the homeowner. Imagine for a moment that you’re a small town landlord who saved up the down payment to buy to single-family properties in your hometown, your plan is to cover each mortgage and pay for a pair of using the monthly rent payments. And you were smart enough to base the numbers on missing a rent payment. At least once each year, all the sudden you find yourself missing rent payments in March and April, as the pandemic begins to course through the United States, your state, then places a moratorium on evictions that will last through the summer, which means you continue without any rent payments may June, July, and August.

Andrew Schultz: (08:57)
At that point, you haven’t received the rent payments on two separate homes for six months. If the mortgages on these properties were for a thousand dollars, each, this means you’re currently out $12,000 and you still have to spend the money and time evicting your renters. Once the moratorium finally ends many mom and pop landlords just don’t have that kind of money laying around. And that’s especially true. If they’ve also faced setbacks or a loss in their own income due to COVID-19 and eviction freeze may help renters keep a roof over their heads, but the end result could easily leave landlords financially ruined or out on the streets themselves while it’s easy to gloss over this fact and assume that all landlords are financially well off the statistics and stories. Many landlords share show that this is not the case. The reality is many landlords use the rent payments to cover the mortgage and pay for rising property taxes and insurance while banking on appreciation of their properties.

Andrew Schultz: (09:46)
Later on down the road, next section called an alternative to an eviction freeze. One alternative is asking federal or state governments to step in with a voucher program that lets runners avoid eviction without asking individual landlords to subsidize their housing. Just like the government is subsidizing individuals with stimulus checks and businesses with the payroll protection program. It’s not unheard of for the government to help cover the rent of people. Who’ve lost their income? This is what leaders of the Florida apartment association have been advocating for in their home state. According to the Tampa Bay Times. One thing we’ve been saying the entire time is that while these moratoriums are well-intended, they’re not a cure for the crisis. Amanda Gill, the associations’ government affairs director told the Tampa Bay times they don’t address the underlying symptoms that Florida residents don’t have the financial resources to pay for their basic needs. In the meantime, mortgage forbearance programs geared specifically to landlords would also help what doesn’t help is assuming all landlords can afford to subsidize housing for renters. We’re suffering from the effects of COVID-19 landlords have bills to pay too, and many have their own COVID related financial problems to deal with already.

Andrew Schultz: (10:56)
This article is an editorial. I don’t want to spend too much time further editorializing, but there were a couple of points that I thought that the article addressed really, really well that I wanted to reiterate. And the first of those points is that the rent is still due at the end of the day when all of a sudden done none of the rent that is due has been forgiven by any government agency that I’m aware of. So all of this rent that’s accruing is still due. It’s not as though this rent is just disappearing and no one knows it. The tenants do still owe the rent. It’s just a matter of how much of the rent is going to be collectible. And how do you go about attempting to collect that rent, given everything that’s going on in the world right now? The next point I wanted to mention, though, it may not specifically have been mentioned in the article is that real estate investing does come with some risk. Every landlord understands that when they jump into these scenarios where they’re buying a property and actually the article does mention that a landlord might factor in for one or two months of nonpayment over the course of an entire year, no landlord

Andrew Schultz: (11:54)
In their right mind factors in for six months of unpaid rent. When they’re looking at the calculations to decide if a property is worth investing in or not, that’s simply not something that you would ever think would be a concern. That’s just not having a rent payment coming in for six months at a time. And that’s kind of where we’re at in a lot of instances if you have tenants that stopped paying in March or April, we’re now, you know, March, April, May, June, July, we’re in July. Now today’s the I’m recording this on July 19th. We’re coming into August, which would be six months. If you had a tenant that stopped paying in March, if you had a tenant that stopped paying before the pandemic started, you could be even further in the hole at this point. The point that I’m trying to make here is that mom and pop landlords cannot shoulder a burden this large on their own.

Andrew Schultz: (12:44)
At some point, there’s going to have to be, you know, a little bit more in-depth program designed to help some of these mom and pop landlords who are struggling right now. Otherwise, you’re going to have a true housing crisis on our hands in this country. Another statistic that’s worth noting is that something like 75% of all landlords are mom and pop landlords. They’re smaller. Landlords who own, I normally one property. I think it’s 50% of all landlords own just one rental property. And then if you look at people who own two, three, and four properties, that takes you up to about the 75% Mark, after that, you start getting into larger landlords, which only represented about a quarter of all the landlords in the country. So when you’re dealing with these mom and pop landlords who may only have one, two, or three income properties, it’s easy to see how quickly they could fall behind when it comes to tenants that wind up in a situation where they’re not paying rent.

Andrew Schultz: (13:39)
It’s very easy to see how a landlord, a smaller landlord could fall behind very, very quickly, and wind up in a position where they might even lose their property. Ultimately, while these eviction moratoriums are well-intended. I think that there needs to be something on the backend here to help some of these mom and pop landlords to survive, to get through the situation that we’re in right now. I know we had talked in a previous episode about maybe a housing choice, voucher, something along those lines to kind of get small landlords back on their feet, or really get tenants back on their feet, which in turn is going to get landlords back on their feet. And ultimately I think that’s what gets all of us moving forward.

Voice Over: (14:15)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (14:24)
Today’s watercooler wisdom comes to us from the landlord subreddit over at reddit.com/r/landlord. Title of this is I’m becoming a grumpy landlord, got a call out of the blue, asking for a reference for a tenant that I didn’t know was moving. I texted her and told her I’m happy to provide a good reference. After she gives me 30-day notice to vacate she’s currently on a month to month lease. She told me she wouldn’t provide a notice to vacate until she has the new apartment secured, but still wants a good reference from me. I can already see what’s coming. She’ll find a new place, move out and then tell me to use the security deposit for her last month’s rent. We screen tenants heavily, but this tenant came with the building and I’ll be glad to be rid of her. The tenants who don’t pass background checks are pain in the butt from start to finish.

Andrew Schultz: (15:08)
My hat is off to those of you who cater to this rental population. I don’t know how you do it. So as I was trying to come up with some advice for this person, I was reading through the comments on the thread just to see what other people had said and see if there was any wisdom that I can draw from here. And actually one of the commenters had the perfect response, the perfect response to the point where I don’t need to actually offer any expert advice at all. After reading this comment I’ll read it in its entirety. I used to get more upset about all the bumps in the road with rentals. And then one day, I don’t know what happened, but I was able to take all this crap and stride number one 99% of the time. It’s not personal. Number two, never attribute to malice that which can adequately be explained by stupidity.

Andrew Schultz: (15:53)
Also if it’s month to month, I would understand her not wanting to put 30 days in until she has her next place lined up. She may not give you any grief about the last month’s rent fingers crossed following up. That comment was another, that basically agreed saying that with the saying, everybody is their hero of their own story explains 99% of all tenant communication. And honestly, I think that the real lesson to be drawn trust from the story. And then the two comments is essentially that clear education is so critical in this business that sometimes we forget just how important it is when a tenant doesn’t communicate with us in the fashion that we want, or when something goes not according to the master plan if you will, it’s a bump in the road, but more often than not, if you take your personal feelings and personal emotions out of the situation and treat it like the business that it is, you’ll find that it’s very easy to resolve most of these types of concerns.

Andrew Schultz: (16:54)
And honestly, I don’t think that this has put past the point where it can be resolved. I think if you explain to the tenant that you need that 30 days notice because that’s how you plan ahead in your business. I think that the tenant might be a little bit more receptive to that fact and understand that, okay, there’s a process here that I need to follow. And by not following the process, it’s going to create more headaches for me down the road. I think that you’ll probably find that your tenant will come around to your side, hopefully, come around to your side and hopefully you won’t have to become a grumpy landlord. That pretty much wraps things up for this week’s episode of the wreck prep for landlords podcasts. Thank you all so much for listening. We really do appreciate it. If you’re looking to get in contact with me, I can be found over at ownbuffalo.com.

Andrew Schultz: (17:38)
You can also find me at facebook.com/buffaloforeclosedhomes. If you’re looking for tenant screening services, you can connect with Rent Prep over at rent-prep. You can also find on Facebook at facebook.com/tenantscreening. If you’re looking for the Rent Prep for Landlord’s Facebook group, that’s an excellent resource that you should be tying into almost 12,000 members strong in that group right now, a lot of great experience, a lot of great people that you can ask questions of and get answers from all over the country. So definitely a good resource to tie into completely free of charge. And you can find that over at facebook.com/groups/rentprep. So definitely check that out today. Again, thank you all so much for listening. We’ll be back next week with an all-new episode and do yourself a favor hug, a loved one today for rent-prep. I’m Andrew Schultz, and we’ll see you next week.