This post is being written for a couple of  purposes.

Those of us with any significant amount of real estate need to plan better for what will happen if you suddenly die.  Your spouse and kids probably will not enjoy landlording as much as you.  Wait, few people “enjoy” landlording, so let’s use the word tolerate instead.  You need to have a list of people in the industry that you trust. Keep that list handy for your family so they can get their hands on it if they need to.

My other purpose is to acknowledge real estate broker Graig Goldman who pulled off what many thought would be the impossible. He sold over 100 properties at a good price in less than two months.  If you attended the March Apartment Association meeting, Graig was the presenter on buying foreclosures.

 The story of Joe

This past November a friend, Attorney Joe Peters, passed away suddenly.  He left behind a wife, a teenage daughter and … one hundred and some rental houses on the north side of Milwaukee.

His wife initially was going to run the properties as she had experience managing  some properties in the UWM and Bayview areas.  The plan was to sell the north side properties in trickles.

She quickly found out lower income rentals are a different animal.

When a tenant would move out the neighbors would steal the plumbing.  She found the DNS code enforcement inspectors harsh and unreasonable.  But the employees Joe left behind were the final straw.

She called me in December, needing help on the employment taxes.  Joe only had a handful of employees so, sure I’d help her file so she did not have to rush out and choose an accountant or payroll service without the time to research her options.

While I was doing the taxes, she was complaining about how much the workers were costing her.  The numbers she mentioned did not match the labor market nor the tax forms I had just helped fill out.   It seemed the employees all doubled their wage the day Joe died.  She decided she would continue to pay the higher wage until she found another solution.

The workers were not productive, even though they were now making twice the industry norm.  When Joe’s wife pushed them to do an average amount of work, they gave her a demand letter asking for even more money. When she refused they quit.

Between the copper thieves, the city and the workers she had enough and decided to sell.  In the initial process she met a lot of people who claimed to be long time close friend’s of Joe’s.  I asked her if Joe ever mentioned them to her.  Nope, never heard of them.  When she told me their offers, it was clear that they just wanted to be close friends with the equity in Joe’s properties.  Some of the offers were all or nearly all paper.  One offer was seeking owner financing and  18% of the sale price to be held ‘in case the buyer discovered repairs that were necessary’ within something like a year.

The wife was so distraught over the problems associated with lower income rentals that she almost accepted one of these ripoff offers.  I spent many a phone call trying to talk her out of doing so. I also gave her the number of three brokers that I have worked with.  One of them Graig Goldman had liquidated a large number of properties that I was a court appointed receiver for.  He had gotten a good price for them in this down market a year or two ago.

The properties were listed with Graig Goldman on February 21st. Graig got right on it and started generating legitimate clean, cash offers.

The vultures that had been circling her told her things like the offers were fake.  They almost convinced her to accept their lowball offers just to get away from the hassles of running rentals.  Again I pleaded with her  not to throw away everything Joe had worked his entire life for.  She agreed.

By early to mid April Graig had sold all of the properties to something like a dozen owners, all but one for cash and that one went to a church with a sizable downpayment. They closed at double the vultures offered prices. Yes, all sold within less than two months of the listing.

Even though he made a decent commission on the project,  Graig deserves to be acknowledged for far and above average efforts required to pull this off in this time frame and in this market

Now if you see this post as an open door to pitch your Russian oilfield, penny stock, gold futures “opportunities” to her, or to offer your hand in marriage … I hate to disappoint you but I waited to write this until she had already addressed the where to put the money question.

File under “Buying Single Family Rentals Has a Downside”

Our crew shows up to work on a vacant property this morning and finds the siding and storm windows gone. It was an okay looking place yesterday. Now it needs to be resided.

At least this time they did not steal the plumbing and electric wiring.

A year ago a similar thing happened.  A tenant that lived in another of our homes a couple doors away saw the neighbor stripping our property and called 911.  The police said ‘have your landlord file a report so he can file an insurance claim’ and did not send out a squad.  By the end of the weekend the neighbor had stripped all the plumbing, heating and electric wiring from the house.

I sent the police and the DA photos my tenant took showing the neighbor loading the siding on to his car.    We ended up razing the property as the damage was so extensive.

No one was ever prosecuted, even though the damage exceeded ten grand.

“Going Green” is usually a positive phrase. Business that go “Green” are looked at as innovators and use this for a market advantage. It is hard to say anything bad about this type of greeness

However the way the city of Milwaukee is going grheck scares the heck out of me. .

As I drove the Southside neighborhoods finishing up our annual fall exterior surveys of our properties, I was shocked at the number of green boarded and abandoned homes and duplexes in that area. Even more than there were in spring

This is downright scary for someone that is heavily invested in the area such as myself, as well as I am certain, for those living in the neighborhoods.

The cause is pretty clear … a government that hated rental housing so much that they felt anyone with a pulse should be a homeowner.

We will pay for this for decades in depressed values, far below not only the top in 2006, but below even the prices we saw in late 1990′s.

Ironically the push to make everyone a homeowner in the middle of the last decade will reduce homeownership over the next couple of decades. Those first time home buyers who crashed and burned just a year or two out of the gate clearly will have second thoughts about trying their hand at this again. When their kids grow up and say “Dad, I’ve decided to buy my first house!” their parents will suggest they’ve gone mad.

This is terrible for the long term health of these neighborhoods as a lack of owner occupant buyers will suppress prices.

The only silver lining in all of this is those of us landlords that didn’t buy into the whole silly money thing six or seven years ago are finding that our occupancies have increased simply due to a lack of supply out there.

From my beginnings in the industry in 1977, all the way through 2006 there was a constant barrage of newcomers to the industry replacing those who busted out or wanted to retire.

Today I do not see them even with prices so depressed that land lording should look good to anyone with a pencil and paper (the way we did performas back in my early days) or a copy of Excel (the way the wiz kids of the 2000′s did theirs)

Yet no one seems to be buying.

Hopefully that will change in the next ten years when I plan to be selling ….

The who’s who of Milwaukee rental housing were in attendance at Joe Peter’s funeral.  So many that one person commented that if a bomb hit the church nobody in Milwaukee would have to pay rent again.  A lot of folks I had not seen in years.  It’s sad that the only time we see these people anymore are funerals for friends.

One such person was Mike, a former board member of the Apartment Association.  He asked if I remembered having lunch with him a number of years ago.  I admitted I didn’t and kiddingly asked if I had skipped out on my portion of the bill. He assured me I hadn’t and that he just wanted to thank me for the sage advice I had given him that helped him succeed when others failed.  I had him remind me of what I shared with him that he felt was so valuable.  Once he told me, I felt it still rings so true that I would share it again.

At that lunch back in probably 2005 or 2006, the height of the silliness we were seeing in real estate pricing, Mike wanted to know how to acquire more units.  I cautioned him that his focus was wrong.

It’s not about how many units you own.  It’s about being sustainably profitable.

Unit fever is a disease that has wiped many owners in both good and bad economies. So don’t aim to have 50,100, 200, a thousand units.  Rather do the math and aim to only own profitable units and create scalable infrastructure before getting big.

A different way of municipalities interacting with property owners

In Washington  D.C. they have  The Housing Provider Ombudsman a information resource for small housing providers.

Blacklisting bad tenants

THE NAMES of 400,000 Australian renters have swelled national blacklists for crimes ranging from pouring concrete down toilets to stealing entire kitchens from properties. [Source]

The untimely passing of Joe Peters taught me another lesson –  no matter how well things seem it can all end tomorrow.

Today is probably as good as day as good as day as any to write down some instructions for those things that only you know, but your employees, friends and family  will have to know to put the pieces together when you are gone.

I’ve spent most of the past 22 years as a director of the Apartment Association of Southeastern WI, yet I feel this is a question that must be asked often so that the Association continues to add value.

In a group like ours every member has a say in the direction it takes.  I became active in the association through John Chitko’s prodding me to do so by saying:

‘This is an all volunteer group. Join, put your ideas out there. If they have merit people will support them, if not you’ll learn something’

Today I urge you to take John’s challenge.

Do I think we are currently doing all that we could or should, No, but I’ve seldom thought that about anything I am involved in.  To do so would be settling.

From my perspective an association of rental property owners and real estate investors should focus on the following three activities (in my order of importance):

• Provide strong advocacy for the industry
• Educate membership on the things they need to succeed
• Provide social / networking opportunities

Advocacy includes addressing legislative, political and the public perception of our industry in a manner that makes it easier for legitimate owners and investors to succeed.

Education is pretty self explanatory, but should include how to run properties as well as how to make money in real estate in a legitimate and honorable manner.

Social and Networking includes our general meetings, trade show, Brewers tailgate party, and the holiday party.

I grade us today as B in education, C on social/networking and an Incomplete on legislative and political advocacy.  Ten years ago I would have given us an A- in advocacy, a B- in education and a C in social /networking opportunities.

Our educational offerings like Attorney Tristan Pettit’s Landlord Bootcamp are well received and add a lot of value for those members who attend.  I see us lacking the “how to make money at this business” aspect and feel that we should add more of this, while avoiding the flim-flam hucksters that some present as education.

Our social / networking offerings like the trade show, Brewers game and holiday party are well attended and these too offer  real value.  I feel that our general meetings could be more engaging.

We really got away from a lot of the advocacy that we did in the past.  We need to return to that as this is our reason for being.  Today we hear from many members that they are frustrated with all the Milwaukee County Eviction Court changes that have allowed nonpaying and disruptive tenants to remain in possession longer than they should.  We also continue to hear from owners of mistreatment at the hands of Milwaukee’s Department of Neighborhood Services (building inspection)

Our November Apartment Association meeting with be the first of at least two on challenges we face in eviction court and how to change them.

Board member Dave Ohrmundt has graciously volunteered to head up a renewed legislative committee.  Another member is considering volunteering to spearhead a statewide legislative effort if he can get others interested.  These efforts will fail if they are just one person.  If you care about what the environment that we work under, then you should become involved.  And involved does not necessarily mean fully committed, although that would be nice.  Little things done by many people have a greater effect than large things done by a single individual.   Attend a hearing at the statehouse, or help write a legislative alert, send us your thoughts on a particular rule or law, or read the pending legislative agendas.  It all helps.

So I want to hear your thoughts and ideas.  Either post them as comments to this piece or email me

Many of you know how I raved about JOTT.com, a service that allowed you to call in from your cell phone and leave yourself a message.   When you returned to your office you had an email with a fairly accurate text of the note you just left yourself.

This was one of the greatest boost to my field effectiveness in years.  No more little scraps of paper, no more forgetting something – it was near perfect.

Then Bam! They discontinued the service as of May 3rd.  I felt like I lost half of my brain.

Over the weekend I tried a new service.  ReQall.com.  I like it.  In fact I like it a lot. It’s like having the other half of my brain back!

Wells Fargo v. Sandra A. Ford is a NJ case that started as a pro se defense to a foreclosure. It ends with Wells Fargo getting spanked by the NJ court of Appeals in what will be a published decision..  At appeal the defendant was represented by Legal Services of NJ, which is similar to Legal Action of WI.

My great interest in foreclose defense cases is twofold.

First I see some of these cases holding the potential of unraveling the entire real estate market by creating hundreds of thousands of “free” homes across the nation. I fear this will cause a second and more dramatic drop in housing prices as once the mortgages are wiped people can sell for practically nothing and make a profit.