Tenant Question – House filthy on move in

February 18th, 2014 · Property Management

mud Tenant Question   House filthy on move in
Hammonton Photography / Foter / CC BY-NC

Tenant Reader Question

I realize your site is directed towards landlords, but I have a tenant question for you.

I have recently moved into a semi-detached house rental, and the place is filthy. When we first visited the rental we thought it looked all right, but after the previous tenant moved out, and we moved in, we became aware of a lot of gross crap (like cat pee, human hair, inches of dust everywhere, and food crusted on carpets and cupboards). Our landlord never closed with the previous tenant, the tenant didn’t keep contact, and almost didn’t give up our keys. They didn’t even do a walk through with us – we were given the keys and they left for vacation. Now I’ve cleaned my hardest, but I expect compensation; cleaning up the previous tenant’s mess can’t be my responsibility, can it? I’ve looked at the Landlord and Tenant Board Act and can’t find any information about this problem. Any help or advice would be appreciated!

Rachelle’s Answer

First off, I’m not even close to Molly Maid but every time I ever moved into an apartment I had to clean it before I moved in. It’s not because it was dirty, it’s because it’s not really clean until I know it’s clean which is after I had cleaned it. In the process of this cleaning I always found other people’s grime and was disgusted by their habits. This was after a professional clean. The cleaning lady being paid $60 to clean is just not that invested in cleaning the back of the toilet where all the sticky filth really lives.

As a manager, I’ve the above complaint about a hundred times. Every time someone who is a relatively clean person moves into an apartment the above scenario happens. In your case, it’s an order of magnitude worse because you had what we call a back to back tenancy. Even if the owner wanted to…which it doesn’t sound like they cared that much, they would have struggled to find someone to clean in the very short timeline between the other tenant moving out and you moving in. You found out the hard way that even people look clean and actually are relatively clean, there’s a lot of dirt. Those dust bunnies do not clean themselves.

It sounds like you are really upset about the situation because I’m not sure the expectation was set by the landlord that when the old tenant moved out there might be some challenges.  This is actually normal in this situation. While it is the landlord’s responsibility to clean in your case, it did look clean enough until further inspection, it’s only when you started cleaning that you realized how filthy it was. Again normal even if cleaned by a professional first.

Now as to the Landlord & Tenant Board my advice to you is to stop consulting them on every minor issue. First of all the call center reps are completely clueless when it comes to the actual application of the laws. When you start saying Landlord & Tenant Board to your landlord, they either fear you or get annoyed with you. The Landlord & Tenant Board is supposed to the last step but too many tenants start there over what are minor inconveniences.

Can you imagine if every time you had a fight with your boyfriend he called Divorce court and started threats of lawsuits? My personal experience in business is that if I have to consult a lawyer when doing business with you, your business is not worth the hassle. So while you certainly might consult the Landlord & Tenant Board about issues, it’s not wise to bring it up to your landlord. It will immediately set the relationship you have with them on the wrong foot.

Having said that… I would talk to or email the landlord and tell her that you feel that the cleaning job left behind by the other tenants was more than you consider fair and that because you’re so awesome they should get you a gift card from the LCBO to wipe all cleaning thoughts away from your brain. If you approach it in this manner you are more likely to get what you want. Frankly the landlord had no way of knowing it would be so bad when the other tenant moved and still doesn’t know.  When you talk about compensation you have to realize that at most it would cost the landlord about $100 to clean the place. So I ask you, even if you don’t like the response your landlord gives you, is it worth $100 to forever impact your relationship with your landlord? No one takes legal threats well.

I hope this helps…

 

 

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Reader Question – Landlord Property Analysis

February 18th, 2014 · Property Management

trimuph finn Reader Question   Landlord Property Analysis
JD Hancock / Foter / CC BY

This reader is a good example that flattery will get you everywhere.

I have several questions about little things, that never seem to be covered in books or blogs, but are important, as I have no mentor (besides you).  No one I know invests in real-estate except for an old college classmate I noticed under comments for the League fiasco.(That cannot be good) These are really based on your experience as a manager.

 My Questions are as follows:

1. I found your cap rate calculator under both landlord rescue and million dollar journey.  You had indicated it wasn’t functioning correctly.  Has it been corrected now online?  If so can you email me the updated version?  Thanks!   It is very useful.

The cap rate calculator is not broken, but the makers did not include the mortgage paydown into the calculation.  I didn’t create a new version, I had to leave something for readers to do. icon razz Reader Question   Landlord Property Analysis

2.  Can other factors be added to it (I can’t do spreadsheets but a friend can) and is it copyrighted where I should not change it?

Add whatever you like to the spreadsheet and give it to as many people as you can.  Me and another gentleman did the work on it, for the purpose of sharing it with investors. My only suggestion would be to avoid any dancing ladies on the spreadsheet…they’re distracting.

3.  Is the old rule I was taught about 25% down, 15 year mortgage, and a 10% return still realistic now or in the future?

No. Certainly not in the primary markets.

4.  Is there a average cap rate or return that the professionals or “old guys” you speak of tend to use.  I do believe properties  are over valued, but deals can be found in all conditions, so I am looking (BC)

Your cap rate should be as high as possible but in all cases it should be higher than your mortgage rate. Otherwise you are losing money.  Do not be on the wrong side of compound interest. 

5.  Everyone speaks of cash flow positive properties, but what is a ball park percentage a person looks for as positive or as return on investment It seems everyone invests for mortgage coverage only, but as a former business owner, I agree with you that $100-$300/mo of positive cash flow is a bit silly for a down payment of $250-$500,000 dollars.   I took a salary while paying down a business that increased in value.

Yeah, well there’s no money in rent these days I’m afraid. If you use the income approach you’ll lose every time to people hoping for capital appreciation. The specuvestors have been profiting for so long, they’re all that are left in the market.

6.  I take it that the cap rate is the best evaluation of properties, since you never discuss market approach, cost approach, or income approach.

I know it’s the primary measure used by institutional investors, so I’ll throw my hat in with them.  Homes are generally not investment grade.

7.  Is there a rule of thumb acceptable to you for quickly evaluating properties prior to a cap rate analysis – I have read of the percentage of operating expenses being 35-45% of gross operating income, gross income multiplier, net income multiplier, and REIN’s (I Know!) 10% solution which seems to be a form of GIM.  It doesn’t work anyhow, as no building that met their 10% criteria has ever cash flowed for me. 

In this market I would say that I would look for strategic advantages in property as you’re unlikely to find a property that cash flows well. The problem is that you’ll generally have to work for that extra money. No one’s giving it away. If you have some kind of professional expertise try and leverage that to your advantage.  Personally I would consider it a shame to buy a property that I just collected the rent on and waited to pay off, I’d want a little extra something something.

I don’t actually hate REIN any more than all the other woo woo bullshit positive thinkers.  I have positive thoughts when I’m surrounded by positive cash flow not Amway salesmen.  This is the result of magical thinking.

7.  I know the vacancy rate and maintenance is covered in expenses but have read that a 3 month contingency fund is a good idea or a percentage of value, above the building up from expenses.  Opinion?

A decently sized contingency fund is definitely a laudable goal. You never know when misfortune will fall and you should be prepared. You don’t want to lose your property because you have a deadbeat tenant. We are in the housing services business and like all other businesses the key to long term success is survival. Every business goes through tough times and you need to have the determination and preparation to make it over the hurdle and move forward.

Your Blog and Pieces under Million Dollar Journey are excellent.  I have likely learned more from them than any other source.  Your recommendation of Douglas Grey and John T. Reed were excellent. Douglas Grey’s “Making Money in Real Estate” is a difficult (as in boring but to the point) read but is THOROUGH.  It and you have answered all my questions about investing except the above, which is experience oriented.  John T Reed doesn’t pull punches and his “bad boy list” is an eye opener.  I will be reading Douglas Grey’s “Canadian Land Lord Guide” for interest, but you and ROM’s BC have been a great source for management information thus far.  Thanks in advance for your answers and I do realize they can only be guidelines/opinions.  I prefer my name and email address not be used if you find any of these questions useful for a post.  As you say, the investing is quite straight forward,  but these little points could make a huge difference.

One additional thing I would add is something I have learned watching all kinds of investors for quite a while. You must like the properties you buy, some people are great managers and others are terrible managers and some are very astute buyers and sellers. In stocks there are some dividend players and people who make a fortune picking junior miners. Those are not the same types of investors.  You must love the properties you own so much that you will gladly shovel the driveway when it’s -40 or you will gladly peruse the 75th page of the commercial lease your lawyer gave you to get your tenant to sign.

Happy Investing

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Did I Kill League REIT?

February 1st, 2014 · League REIT Updates, REIT, SLAPP suit defense

 Did I Kill League REIT?
Foter / Public Domain Mark 1.0

Tim Kiladze of the Globe & Mail has been writing about League. Earlier this year he stopped short of calling them a Ponzi while stating that LISI staff told him they could only fund investor redemptions by finding new investors to invest. It takes a brave journalist to continue reporting when the defamation suits start to fly. His new article is fantastic (mostly because I’m in it and I’m so humble)

Emmanuel Arruda considers me to be part of the “insane clown posse of internet detractors” He’s also quoted as saying the “numbers side of business is not his thing.”  The insane clown posse of internet detractors is given equal importance as the 2008 financial crisis in League’s downfall. Both reasons are completely ridiculous and underscore Emmanuel’s complete lack of understanding of the REIT business model and how it works.

Frankly it doesn’t matter a whit about internet posses. I was sued by League for defamation and every single one of my tenants paid me rent and I turned it over to the owners and no one lost income. Is Emmanuel Arruda claiming that tenants wouldn’t rent space in his 25% vacant cash bleeding malls because of the League Reviewed site? In fact I’m pretty sure there are a lot of people who think I’m crazy and an asshole and even more who actively dislike me, and a few landlords I fired and hundreds of tenants evicted who are not my fans. I still collect rent and provide housing and my business goes on. There is no such thing as a popular landlord.

The credit crisis was in 2008… over 5 years ago, what does that have to do with anything relevant? No one is forcing you to over leverage yourself, or to continue to do deals when it’s unprofitable.

If you’re a landlord it doesn’t matter one single bit what people think, tenants still have to pay you rent or move. So your income should still be secure.

The only thing I did was warn new investors away from his and Gant’s scheme. I couldn’t do one single thing to save the existing investors from them or minimize the impact. Frankly I feel guilty I did too little too late. I mostly only took interest in exposing their own financial statements after they sued me. The only way I could be hurtful to them is if their stated business of real estate was a sham and the majority of their income came from raising funds from new investors. Naive new investors. Fodder for the League grist mill.

Emmanuel claimed I told people to call BCSC about their going public and this ruined their chances. What. A. Steaming. Pile. The whole idea of “going public” is that you actually have a business that generates a return for investors and that it’s so good you need/want to share it with a greater market. In League’s case, they were already broke and many of their investors wanted out because they ceased distributions on their common shares. The whole idea of a public market is that there is someone on the other side that wants to buy. Nothing could be further from the truth and as any REIT that ceased distributions on the public market can tell you… no one wants your crappy non distributing REIT and investors will sell those shares for pennies on the dollar. That is what would have happened with League had it been approved for listing. Penny stock. Arruda and Gant published an article implying that investors would gain 17% on the public market when League went public. What a complete crock of lies and misdirection.

Finally, to any CEO of any company that “doesn’t get the numbers”. What do you think your job is? Maybe wig holder-upper? Toilet holder-downer? Office spacer? Most people would think that a CEO’s job would be interpreting the numbers and providing guidance and direction to the company and employees and investors and shareholders. In your case, obviously that would be wrong, because numbers are not your thing. Maybe you could let a little reality penetrate your woo bullshit and really accept what you’ve done. You and Adam Gant are solely responsible for separating 4200 investors from $370, 000, 000.00.

I may be insane but you’re the clown. 

 

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InterGenerationalWealth REIT – Ponzi From Day 1

December 1st, 2013 · League REIT Updates

fraudchenjin 300x48 InterGenerationalWealth REIT   Ponzi From Day 1A wonderful lady I was speaking to yesterday said that if could find figures that showed that League had not made any money and had lost money year after year and kept taking money from investors than that would be enough to prove intent to defraud. Another item that would be useful would be material misrepresentation. One particularly annoying point with many investors is the statement “We get paid when you get paid” clearly not true.

Using publicly available documents I went back to the beginning of League and looked for two simple items.

Income and Compensation of Related Parties (Gant & Arruda)

According to the documents filed with the BCSC as on January 31st 2007 there was $10 in the bank account.

Net Loss 2006  $(1,022,366) Compensation $1,022,952

Net Loss 2007 $(3,300,100) Compensation $2,897,385

Net Loss 2008 $(4,160,008) Compensation $3,433,475

Net Loss 2009 $(131,180) Compensation $5,241,027

Net Loss 2010 $(19,104,524) Compensation $ 7,035,999

Net Loss 2011 $(26,916,631) Compensation $ 6,266,036

Net Loss 2012 $(62,571,109) Compensation $ 6,556,435

Now those numbers are truly impressive in the same way antimatter is impressive. It’s nice to theorize about it but you don’t want any around you or sticking to you. In that way I think we should rename the InterGenerationalWealth REIT to the AntiGenerationalWeath Scheme operated by the inept Adam “Value Destroyer” Gant and the Amazing Disappearing Emmanuel Arruda. They have in 7 short years managed to mislead and take senior’s and vulnerable people’s RRSP’s, pensions, nursing home money, encouraged people to mortgage their homes, and found myriad ways to unjustly enrich themselves all while failing to ever make a profit.

If this isn’t illegal, I’m starting my own country, where it is illegal.

 

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Partner’s Shares Find A New Home

November 29th, 2013 · Partner's REIT Updates

share 300x117 Partners Shares Find A New Home

McCowan and Associates files Early Warning Report with respect to Partners Real Estate Investment TrustBarrie, ON November 28, 2013 – McCowan and Associates Ltd. (“McCowan”) announces that it has today acquired 3,872,863 units (“Units”) of Partners Real Estate Investment Trust (“Partners REIT”) at a price per Unit of $7.00 from one seller by private agreement. Immediately following the purchase of the Units, McCowan had beneficial ownership of, and control and direction over, directly or indirectly, approximately 14.95% of the issued and outstanding units of Partners REIT on an undiluted basis. The acquisition of Units in Partners REIT by McCowan is for investment purposes. McCowan may from time to time dispose of, or acquire, additional units of Partners REIT.
About McCowan and Associates Ltd.
McCowan and Associates Ltd. is a private company controlled by Ron McCowan, an entrepreneur who has over 40 years of extensive experience in real estate development, construction, ownership and management. McCowan currently owns and manages properties comprising more than 4 million square feet.
This press release is issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which also requires a report to be filed with regulatory authorities in each of the jurisdictions in which Partners REIT is a reporting issuer containing information with respect to the foregoing matters (the “Early Warning Report”). A copy of the Early Warning Report will appear with Partners REIT’s documents on SEDAR at www.sedar.com.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this press release.
For further information, including to obtain a copy of the Early Warning Report to which this press release relates:
Ashley Sherrard
c/o McCowan and Associates Ltd.
158 Dunlop Street East
Barrie, Ontario
L4M 1B1
Tel: (416) 271-8249

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