Closed Captioning:
what’s going on everybody it’s matt aka
the lumberjack landlord here with my
good buddies the other two of what makes
the three amigos
how’s it going guys how’s it going mike
going wonderful thanks for asking it’s
friday i know tomorrow’s actually
saturday for you i get it it’s friday
night for dion
yes
it’s awesome good for you guys dion it’s
friday soon to be friday night how’s it
going
again
[Laughter]
we did a live stream last night on um
millennial mike’s channel and i think
people should just pop over there and at
least check out
the first three minutes
when we were live but didn’t know it
because he was learning the tech yes i
was literally on the phone with him
walking him through it and he’s like
yeah we’re not live yet we’re on line
yes and so he’s really cool he’s
gracious he’s leaving that up he’s like
yeah we make mistakes i’m not gonna take
it out it’s great i love it yeah i was
like who is that voice from above oh
wait a second i feel like i’ve been read
a story by that voice
[Laughter]
so anyway the topic i wanted to talk
about first today guys was tenants um i
think that you know as i’m starting to
see things we touched on it a little bit
last night on the video one of the
things that i’m starting to see is
uh broken leases as well as um
slower or fewer qualified renters
right because part of my criteria you
know really my three main things is
credit score above 680 that you make
that you net three times the rent um and
that you have a um that you paid your
landlord the last three months of rents
and i want proof of that um because i
don’t believe that you paid cash so in
with those three criteria what we’re
seeing is is we’re actually getting out
there we’re posting our units um and we
just had one that we posted and it was
250 inquiries in 72 hours
um and it’s like pulling
i get yelled at for not having an
application fee
i’m getting yelled at for not having an
application fee and i said these are the
only three things that i want you to
provide you can provide those three
things i’ll waive the application fee
i’m not going to provide that
information
then you know getting a unit
so
mike talk to me about what you’ve
instructed instructed your
property manager and what feedback
they’re giving you on on what they’re
posting and what they’re seeing in the
market have you gotten any feedback to
that end yeah so it’s you know again
you know daily operator right uh you you
it’s actually your store it’s kind of
funny because you’ve done a lot more
acquisitions the last 12 months than i
have yes right
i spent the last 12 months kind of
rejiggering all my debt yeah i did buy a
couple of units here and there
a lot of my work was focused on trying
to build an adu
because it was a better yield
but that actually gives me the ability
to look at my portfolio
roughly
same same right apples to apples right
same people i had a year ago same
properties it’s not like your situation
where damn it i added 50 doors and i
don’t know who i got and
it’s a lot of churn uh i get a daily
report
of rent collection
uh today versus this today
last month right so every month i can
see what’s going on
and there’s a couple of themes that that
are going on one rent collection is
slower
yeah
now than even four months ago yeah
interesting
uh we have had uh more turnover uh in
the last four months than we had
certainly the previous four months
by a pretty large margin
uh and then finally um
we haven’t had more evictions yet knock
on wood
uh but but um
vacancies you know i hadn’t had a
vacancy go more than 48 hours in like
five years
we’ve had a couple of vacancies and it’s
really weird at least in my market i
only can talk to mine apartments are
slow
okay houses are
crazy yeah all the competitions on
houses houses you could pretty much name
almost any rent
um but apartments which is about 60 of
our unit count they’re slowing down
and
this is kind of what i put out
six months ago like
this this syndication this stupid
assumptions this this
rent’s gonna go to the moon it doesn’t
go up like that
with this this has been unnatural rents
are gonna have to come down
and i
i really do think you’re starting to see
it in um
like the smaller apartments you know
like the the studio the one bedroom one
bath at 580 square feet the two bedroom
one bath you know 600 square feet 650
square feet because again neighbors
right you just don’t want it if you have
to go there
you have to but it’s really weird i i do
think
i think that it’s really it’s really
weird to say this i think the last two
years
were kind of unnatural
because i think rent collections really
weren’t that bad no
and i think i think i think landlords
got spoiled i think i think a lot of
people who have been operating larger
apartments the last two years uh got
spoiled have made horrible assumptions
their debt structure is terrible and
we’re about to see a lot of pain i think
there’s a lot of pain coming to
multifamily i agree dion
i think the tenants
are feeling the pain yeah and it’s
i talked with both of you over the last
couple of weeks about my my perception
of a flaw in the affordability index
if if we’re looking at historical data
on everyone’s wages from last year and
what we’re assuming they’re increasing
affordability index seems off
but when you have work remotely options
people from
huge cities that were making you know
multiple six figures can move to a rural
area save thousands of dollars a month
but pay twice what anyone else was
that’s what my tenants are experiencing
so at the beginning of this year
my last purchase i’m much slower than
you guys i i don’t actually have the
goal to add a whole bunch of units i’m
going to buy one more probably in the
next year or two i bought one last year
but this year the beginning of this year
i spent doing the binder strategy with
all the tenants and i had across the
board a rent increase from 20 was the
the smallest to 28 was the largest so 28
to 28
rent increase at tenant’s request i had
two tenant turnovers which doubled the
number i’ve ever had like in 10 years
i’ve had four
um one person bought a house and one
person moved out of the area
so i get to reset rents to area average
yeah and i have great relationships with
my tenants almost any time i have a
place that’s coming available the
tenants have reached out and said hey
it’s great living here i’ve got friends
can they apply to you know can i get the
link to your place when it comes open
absolutely
i send the link to my current tenants
who had the binder strategy and their
rents went up 20 to 28 percent
and they see the amount of the new unit
that’s next to them
that’s like in the same unit and while i
did some minor upgrades like i put in
flooring and paint i didn’t do kitchen
bathroom guts or anything just the
basics
it’s double
like that’s the amount of rents we can
demand
on a new tenant because of work remote
options so i have three roommates all
working remotely took that for twice
what my 20 to 28 increase was
wow
tenants are going to suffer because a
lot of landlords aren’t like us i think
we keep our rents at or below area
average like we’re not trying to push it
up i mean yeah when you do a complete
rehab you’re going to get area average
rents i totally get that but we’re not
going to our tenants and saying hey
you’re getting a 600 increase in three
months because the rents have gone up
so but there are people who do
absolutely
yep we um with these units that we put
up we i think it was it’s i think now
because we actually had uh two people
break their lease this week
um and so and they literally were like
hey just wanted to let you know i moved
out
it’s september 3rd i was kind of
expecting a call about my rent rent a
couple days yeah
that was not what i expected
you got me
she’s like i know you’re going to keep
my deposit and i go i think that’s kind
of a foregone conclusion but there might
be you’re right
it might be more than that
um but i think again at the end of the
day it’s like and i just asked her i was
like well why’d you move she’s like my
husband lost his job i said oh it’s
coming i said i said
well let let’s try and get you help with
assistance i said i’m not there waiting
at the door ready to post papers
like i’m i want to have the conversation
first i you know uh dion had that story
where they’re basically like hey
pound sand i’m not paying you these
people weren’t doing that i wasn’t
saying that and so i was like let’s at
least have that conversation she’s like
no we’re because we have no idea when
that assistance will run out and we
don’t want to have to move out in the
winter time and i was like fair enough i
was like i get it so we just had the
conversation they said all right i’ll
i’ll keep you posted send me your
forwarding address let me know
um and so it was a peaceful move out
they still broke the lease
but it was a peaceful mop it doesn’t
have to be nasty but i think that them
having the foresight though that
they don’t know how long it’s going to
take to get him a job and at the same
time too it was also a little bit more
annoying they were pretty pretty rough
tenant um one that i wasn’t a huge fan
of they they were you know like they
were the light bulbs out kind of tenant
i’m like you need to fix your own light
bulbs
um but what was really interesting was
there’s no way that guy’s gonna have
difficulty getting a job he’s yeah you
you wouldn’t think he could get a job in
five seconds
like
they’re just using it as the catalyst to
be able to get out move in with their
parents
that’s
yeah that’s what i found out they’re
moving in with their parents and she’s
like and so our bills just go to zero
and i was like yeah i know how that
works yeah there’s a thing called house
hacking i got it yeah i’ve heard i
finally there were videos about that um
so i think what’s interesting is as that
continues to transpire mike are you
seeing more people
reach out for assistance
because i don’t know how that works in
california in new hampshire it’s a very
easy thing to reach out for that
assistance
um
not yet
okay not yet uh
you know the the fresno employment
market is still relatively strong i have
not heard knock on wood
uh about tenants being laid off yet not
that it couldn’t happen i just haven’t
heard about it yeah um
but no not yet
it’s
i mean my my property management company
has a whole list of people that provide
assistance so it’s not unheard of we’ve
done it a bunch of times and are willing
to help when they
basically it’s a two-way street you
reach out tell us they’ll help you
absolutely
um but yeah there’s still be i mean i
haven’t had a broken lease in a little
while but i mean they happen for all
kinds of reasons some good some bad
it happens right so
i just think the economy is going to get
worse i agree and there’s a lot of
multi-family investors who have not been
through owning apartments in a recession
hard
yeah owning single-family homes in a
recession not as hard i agree yeah i
think small multifix fits under that
bubble when you talk about you know
family certainly i think is the best
asset but the two threes and fours like
still works a small part yeah it’s it’s
when you get 10 units and it’s five on
the bottom five on top you got an 18
that’s nine and nine it’s it’s when
everybody’s crammed together and then
you get rising unemployment and people
are drinking at noon and
it’s just it just becomes a problem the
more space you have and the more it
feels like your own home even if there’s
a connected carport or a shared wall
it’s all good it’s that
it’s that let’s get a lot of people
together for 24 hours seven days a week
it’s just
it can lead the problems and i don’t
think many people are ready for it i
i completely agree with you dion are you
doing anything different
in knowing that the economy is going to
get tougher and knowing rents are where
they are are you are you as a cell phone
yeah right i retired from a six-figure
job
so you could spend more time property
managing i’m not missing the course i
could spend more time doing all of the
nothing that i want to
so
building a
a rental portfolio
as you’re building it i think people
should be planning for
prolonged government shutdown pandemic
stock market crash recession
so i’ve diversified
the properties
these small multi-family separated by at
least 10 miles
close to several economic drivers
so that several places would have to lay
off from different kind of sectors so
they’re not all in a tech area they’re
not all at the hospital they’re not
allowed by the college
they’re not all by the base
but
i also diversify the tenant type sure so
in a recession the military might
downsize
but that’s months you know everyone’s
end of current contract doesn’t happen
at the same time it’s not like everyone
signed up january 1st it’s like all
throughout the year people might be
getting out
a recession doesn’t impact retired
people yeah recession doesn’t impact
section 8.
so yes i have a few tenants who could be
impacted and during 2020 i had two who
reached out for assistance from the
cares act and both of them had two
months covered so they got two months
free
never missed a day of work
worked the whole time just went and said
hey can i get some help with rent and
that kareza’s covered two of their
months
so i have a smaller portfolio so it you
know a third of them if they stopped
paying
i would feel it
it wouldn’t it wouldn’t mean i was
pulling money out of my pocket or having
to go to work or anything
so that’s what i’m doing different i’m
i’m planning from
pretty much not day one but like seven
years ago thinking
as i add properties okay i have three
military people i’m not going to
advertise the next couple of days on the
base like i’m not going to advertise no
military like i’m not going to
discriminate but i’m going to call the
housing authority and say hey here’s the
link to my next unit that comes
available next tuesday who do you think
i’m going to get and so i sleep like a
baby
i’m i’m ready with reserves so i have it
if i have a tenant and if they’re
watching feel free prove it who loses
their job gets a demotion gets cut there
gets their hours cut i can work with
them there’s there’s a couple things and
i actually earned one of these from you
matt
and a friend who recently went through
an eviction in washington state if
somebody’s going to get those papers put
on the wall because they’re not paying
or they even send an email i’m not
paying
you’re also required to provide
the resources for rent relief readiness
rental assistance all of the different
options that they have here i think
there’s like nine of them that we had to
put on her wall
and if the tenant isn’t a douche that
just says i’m not gonna pay
of those nine things those papers help
them get the assistance they get to go
look
i’m being evicted they’re getting right
to the top of the list of people to get
helped so i mean there’s like this so
many tiers of things that have to go
wrong that by the time i think that a
portfolio like mine and you guys are
even larger and as diversified if not
more
i’m still and i don’t want to be the
broken record i’m more concerned with
the person who sat back and said i’m not
buying rentals
because there’s a recession coming in
and that my tenant might get laid off
well if you’re not buying rentals and
you get laid off
yeah one income versus multiples mike
any further thoughts on this one
uh again i um
kind of a broken record i’m very nervous
macro 2023 yeah micro olivia and i i
have never been there’s only one year
that likely will be better that was
2010.
2023 could be the best year for olivia
and i most cash deployed lease down
payments most cash flow gained i’m
ecstatic for what’s coming
uh but macro right i have a heart i i
feel for folks uh i think i really do
think 2023 could be the worst economic
year of my adult life and i don’t feel
good saying that yeah yeah i think it’s
going to be i think it’s going to be
tough i think it’s going to be tough
jobs market i think it’s i think all of
that stuff shifts
um and i think that you know we we tried
to be reasonable in our rent increases
in
ironically we were able to stay below
market in a number of them um and i look
at the competition and i’m seeing you
know i’m advertising a a nice three bed
uh one and a half bath
for 2300 and i see literally two blocks
away
some clueless person has a one bedroom
for 25.95
and i was like that’s gonna stay vacant
for a real long time it just it is so
mike tell everybody where they can find
me my friend uh one rental at a time and
if you’d like to join my live streams it
will be 8 a.m on saturday 60 minutes
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everybody talking to number two