Landlord Shmandlord

I showed the apartment tonight to a woman with two children. She was aware that the place is being renovated but wanted to see it anyway. It turns out that it isn’t what she’s looking for. While up there though, several interesting things happened.

First, I wanted to see what else needs to be done before the place is rented. It is actually looking very good, and should be rentable this week. The largest outstanding items are the windows, but I have the quotes and know now which windows I’ll completely replace and which ones will only get new glass.

The other ridiculous thing that happened is that one of my current tenants, who has been there for multiple years, informed me that she has already bought a puppy and wants permission to keep it. First of all, this is against her lease, which as of now forbids it without written approval from me (the pet agreement). I did tell her about 6 months ago that I would allow her to have a dog if she filled out the extra pet agreement, but that was before the dogs shmogs incident. Today I just said that I’m going to have to talk to my lawyer to determine if she can keep it. After I left, she called me to say that she spoke with her finance and decided if they can’t keep it they’re going to move out.

Of course, it isn’t just any dog. It’s a bullmastiff puppy. From what I’ve read, these things get huge, are powerful, and will defend its family well. I did find one funny note, according to Wikipedia’s bullmastiff page:

The Bullmastiff is courageous, loyal, calm, and loving with those it knows. It has a very strong protective instinct and will defend its people against anything it perceives as a threat. However, it doesn’t normally attack to protect, instead it simply knocks the intruder over with its massive size and pins them to the ground. Bullmastiffs become immensely attached to their families and do best when they can live inside with their people.

I don’t know if I can deal with dogs anymore, especially large ones. At the same time, they have been very good tenants. Also, if I did allow them to keep it I would certainly require more rent.

I’m going to sleep on it. If you have an opinion about bullmastiffs, please let me know!

You may have noticed a new image on the sidebar:

It is from a little web application that I’ve been working on called NetWorth. It allows users to monitor their Net Worth using real estate values from Zillow.com and stock quotes from Yahoo Finance.

Once you’ve input your assets and liabilities, you can then put a banner on your website like the one above. It’ll then automatically update as it receives new values from Zillow and Yahoo.

There are actually three different banners to choose from You can show:

1. The percentage change in your Net Value over the past week
2. The dollar change in your Net Value of the past week
3. Your current Net Value

If you choose to allow only the first one, viewers have no way of knowing your actual net value, but can get an idea of how it changes over time (and therefore, your mood).

Give it a shot, and I would appreciate any feedback.

The 11th editon of the Carnival of Real Estate is posted over at Matrix. Go check it out!

The unit will be ready to show early next week.

We had to paint the whole master bedroom, which the previous tenants painted a hideous shade of purple. We also had to patch the holes left in the other rooms. Interestingly enough, one of the holes, which I noticed only after all of the junk had been removed, is fist-sized and was conveniently covered up by a wall hanging.

All of the rugs have been ripped up and the floors are being sanded, which will be completed tomorrow. We will then finish them, and cover them with throw rugs (easier to replace). I have a list of potential tenants, but am going to wait until early next week to show to show it (by then the apartment will be cleaned too). Hopefully I’ll get it rented by Oct 1.

I am also replacing the two windows that the last tenants broke. Actually, the previous owner replaced every window in the building except for these two, so I suppose I was fortunate that these were the ones that were broken.

Once I have the bills for all the repairs *and the place rented*, I will start tracking down the old tenants and bring them to court. I have a few leads, but as of now do not know where they are living.

Flooding has been in the news a lot recently, and it can (obviously) be very devastating for a real estate investor. For example, look at what happened to investors whose buildings were flooded in New Orleans due to Katrina: instantly they’re no longer collecting rents, their properties require extensive repairs, and their investments are worth significantly less than before the flood. Future investors will certainly need to factor these risks into any future purchases.

The above case is pretty easy to analyze because the risks are fairly well known. There are times when the problem isn’t so straightforward.

One such case is when flood patterns change, sometimes very unexpectedly. The Delaware River, for example, runs along the border between New Jersey and Pennsylvania. Anybody who is familiar with the Delaware and its river towns are most likely familiar with the notorious Flood of 1955, which was the worst in living memory. Afterwards, there was a long period without much flooding. Seemingly all of the sudden there have been a series of very bad floods the past few years. In fact, if you examine historical flood data, you’ll see that half of the “Major Flood Stage” crests on record occurred in 2004-2006 (For these numbers, I am using historical crest data at Riegalsville, PA. Major flood stage is 30ft.).

1. 38.85 ft on 1955/08/20
2. 35.90 ft on 1903/10/10
3. 34.07 ft on 2005/04/3
4. 33.62 ft on 2006/06/29
5. 32.45 ft on 1936/03/19
6. 30.95 ft on 2004/09/19

The first question that comes to mind is, why all of the sudden have there been so many floods. Proposed reasons include (source):

• Poor management: floods could be minimized by regulating flow into and out of reservoirs that release water upstream
• Overdevelopment and construction, both along the main stem of the river and its tributaries.
• Bad luck. Too much rain, too quickly.

A friend of mine lives on the river in what was thought to be a 50-year flood-plain (this means that he has a 1/50 chance, or 2%, of having his house flooded in any given year). The river entered his house in each of the three floods listed above. Each time, he has had to refinish walls, replace appliances, landscape his washed-away driveway and yard, etc. His house was worth upwards of a few million dollars in 2003, and he believes that these floods could have eaten away over 30% of this value.

His flood insurance does help somewhat, however each flood still ends up costing him thousands of dollars, not to mention the hours of work preparing, evacuating, and then restoring. He personally believes that upriver construction is primarily responsible for the problem, and is interested in selling the property if he can get what he believes it is worth. He acknowledges that this will most likely require him to wait for an extended period without floods.

As an investor, how can you prepare for a situation like this? Should you simply avoid buying a place anywhere near rivers or lakes? If not, how do you prepare for the potential financial hit? How about other natural disasters, like earthquakes in California?

Personally, each of the places that I’ve purchased are in areas where it is highly unlikely that they’re going to have problems with a flood, and I am certainly comforted by this. I can appreciate how desirable water-front property is, but I believe that in order to purchase it as an investment you need to have a very large slush fund set aside (making it much less lucrative).

(Note: I took the above picture in Lambertville, NJ in April, 2005. If you would like to see more, check out this guy kayaking in his backyard, a submerged river-front shop, or an image of the Lambertville Station (there are two parking lots under there.)

I recently found this website, Trembicky.com, which is a site where “tenants can share horror stories about lousy landlords they’ve had”. Viewers email in their horror stories, which are then printed (including the Landlord’s name) on the front page. This is in hopes that would-be tenants can use the site as a resource to avoid renting from “bad landlords”.

According to the court officer in my town, the tenants that I just threw out have been evicted two or three times already, usually leaving the apartment heavily damaged. I know (from a different tenant) that they signed a new lease elsewhere a few days before moving out of my unit. I don’t know where that landlord is, but surely they’d like to know what I’ve just been through. Ideally, they would have had a similar website to look through before signing their lease.

In actuality, there are ways to look up if a potential tenant has been evicted, since evictions are part of the public record. But what about bad tenants that aren’t evicted but cause problems while living there or leave the place a disaster when they leave? These types of problems wouldn’t be recorded anywhere, though they should be shared.

My questions to you are:

1. Is this legal?
2. Can landlords do the same?
3. If so, is there something like this already?

Oh, and if you’re a landlord and your name is on the site, I’d love to hear from you.

Now that my troubled tenants are out and I know the place isn’t too damaged, I can post this without being as wary! Reuters is carrying a bizarre story about an evicted tenant that blows up his landlord’s flat:

LISBON (Reuters) - An 80-year-old man blew up his flat on Monday to retaliate for being evicted by his landlord, bringing down part of his five-floor central Lisbon block and setting it alight.

“He had threatened neighbours that he would blow up the place if he ever got kicked out,” Carlos Pinto, a fireman with the Lisbon fire brigade, told Reuters. “I guess he kept his promise.”

He said neighbours had reported that the man had threatened to pour petrol on his floor and set it alight, and one reported seeing him with a bottle of petrol moments before the explosion.

The man suffered severe burns. No other casualties were reported.

At least my recent situation didn’t get this out of hand.

The place is now getting painted and the floors redone. I’m bartering with my tenants (the ones who cleaned the newly opened unit), in exchange for their work I am going to give them discounts on their winter rent. For me, this is better than discounts on current rents, because I’m already not collecting rent in the unit that is getting fixed. For them, this is better because they typically work outside, so the winter months are when they are most stretched.

They are very hard workers and charge very reasonable rates. Hopefully it will be finished within a week or two.