Landlords are often painted as the big, bad wolf, but how broad of a brush are we using in this analogy? With the Biden Administration’s proposed Renter’s Bill of Rights, landlords are finding themselves at the short end of the stick, which many believe will actually end up hurting tenants in the long run. This episode features Brian Phelt, owner at ForeFront Property Management, as he and Brad break down the proposed legislation, what it means for tenants and landlords, and what should really happen if we’re serious about improving renter/landlord relationships.
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Connect with Brad's team at www.rentwerx.com!
Brad Larsen: Everybody. In today's episode of Got Bryan Phelt, we're going to be talking about the Renters Bill of Rights.
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Brad Larsen: Welcome, everybody, to another edition of the Property Management Mastermind podcast. I'm your host, Brad Larsen. Now, today's guests, I've got a good friend of mine, Brian Phelt, coming on now. Brian is in the local San Antonio market. We've got lots of history together. He's actually a good friend of mine, a huge Metallica fan too. He's got me tickets to go to Metallica in Vegas, and he's just a really good dude because he has background as a second generation real estate professional. His dad, Hermann Feld, owned one of the big franchises here in San Antonio for a long time, so he's kind of a staple in the San Antonio market. And Brian also has experience as a police officer. He spent quite a long time, I think 17, 18 years in the San Antonio Police Department. And so he sent me this article, the Renters Bill of Rights, and we started to chat upon it and really said, hey, before we get into too much discussion back and forth on what this means to us, we really just need to record a podcast and have a conversation. So we're neither of us are super well versed on the whole article. We don't know all the ins and outs, but we're going to kind of discover it together. It does talk about rent control at a certain point, and Brian's a guy. He's he's been in the NRP leadership, He's at the local level in the San Antonio region, at the state level for the of the state of Texas. So I understand the big political play and everything. And he's always expanding. He's always got good ideas to do cool stuff. So it's really a fun conversation that we're going to have today. And so without further ado, I'm going to bring on Brian. And here we go. Welcome, Brian. I appreciate you coming on. Thanks for coming on the Property Management Mastermind podcast. And to give a quick introduction of who you are, give us a few minutes of your time.
Brian Phelt: Awesome. Thanks for having me, Brad. Brian Phelt I own Forefront Property management here in San Antonio, Texas, same city as RentWerx. We are managing just under 200 properties, primarily single family, a couple of commercial strip centers, a little bit of small multifamily, less than 20 units.
Brad Larsen: Yeah. Now you're one of the best peers in the market that I have. And it's funny because you and I are competitors at a certain aspect, but more along the lines of we just kind of like to share ideas and make sure that we're both kind of in line with what the sense of reality hits. And this is. This is totally different because, you know, for example, I've been working with some people in the real estate world and they cannot understand how property managers share. Like it just blows them away. I'm like, No, you would not believe how much we share because our competition is not each other. Our competition is the individual self managing landlord, and they're the ones taking a lot of our business because they're not bringing us their business or it's the leasing agent out there working for whatever company you have in mind. They're the ones taking our our business. Now, this is not an episode to describe how much we're buddies and whatever else. And we are we're friends and we've been we've known each other for a long time and we share quite a bit in the marketplace as far as ideas and so should we just go and tell the story, get get it out of the way now, how we met. I mean.
Brian Phelt: Just I mean, my record to honor your recollection.
Brad Larsen: Okay, let's do a little bit of both because, you know, it does involve the late great Kevin Knight and he was one of our mentors. And you ended up at the Texas Style NARPM conference, and it.
Brian Phelt: It was my first the one.
Brad Larsen: The first of your first conference. It was right across the street from a steakhouse. I can't remember the name. It might have been Texas Steakhouse or something like that. But, you know, of course, Kevin, you know, knowing Kevin and we all loved him, you know, we're all standing around, you know, about 5:00 conferences saying, let's go have dinner, you know. Kevin And he grabs everybody around him. He just he just like he's always got a plus one, no matter who it is. He's got hangers on. And so we ended up together at the table, and I'm going to let you take it from there.
Brian Phelt: So we're at the table and Kevin is asking me to or he's describing me to everybody. I'm second generation. It's my first conference and Brad decides to ask me if I'm going to broker owner. And I looked up and said, What is a broker owner? And what happened after that Brad?
Brad Larsen: I kind of dropped my fork and I said, Are you kidding me? You got to go to a broker owner because it's one of those conferences that it's kind of like the marquee of the property management world as far as you can. You can go and it's very similar to PMMCON, right? The PMMCON and the broker owner, the very similar levels. You know, we do things a little bit different at PMMCON, but we give homage to where we learned a lot of that from broker owner and I recommend both conferences. And so what we decided is that OK rookie, we're going to have to grab you and we're going to mentor you and we're going to have to teach you the the ways of the force. And the young Padawan learner has since then taken that to heart. You're now particularly involved in NARPM. I'm here and there. I mean, you've got some things going on. You are now the local San Antonio NARPM chapter president, am I correct?
Brian Phelt: I was president for local in 19, and then 20 and 2021 and 22, the state chapter for Texas. So I'm now past president for the state.
Brad Larsen: Right. So you're still involved in the leadership? For sure. I get confused about it all because there's just so many positions and they rotate every year. I mean, yeah, don't get me started on that. But you know, the other side of that is you're you're completely involved in the managing world and your second generation. And so to to elaborate to the listeners, your dad Herman, was a big staple in the San Antonio market. So you grew up under this and you served as a San Antonio police officer. What was it, 18, 20 years, something like that?
Brian Phelt: 17 years. Yes, sir.
Brad Larsen: Yeah. Yeah. So all that being said, okay, let's back up now. We're going to address the topic at hand because you sent this to me and I said, do let's just jump on a podcast. So this is not the end all be all podcast of this. New Joe Biden proposed Renters Bill of Rights. We just wanted to jump on there and have an open conversation about it. So he and I are both discovering things as we are talking. You know, we're looking at the Yahoo article, we're looking at the bigger pocket article where they summarize it in pretty distinct detail. And a lot of it has to do with things we've already talked about or heard about that's coming. Scott Brady and I have talked about this a lot. As far as in the West Coast, the Renters Bill of Rights, the renters nation, the rent control that's coming. And so let's just kick it off and kind of give me a couple of points of what you think. This you try to describe it in your own words and let's just kind of kick this around and go from there. So start from.
Brian Phelt: Well, you know, when I saw it, what caught my eye is everything since we went through COVID has always been one sided on housing. Right. I don't see anything in here for a landlords Bill of Rights. I don't see anything here about helping people. I don't think people either were not getting the message out of how investing works or people don't want to hear it. But you're only getting one side of the story here, right? So the concern is where whose actions are causing this? Is this happening from professionally managed properties or is it from individuals or is it market specific? That's what I would be curious about. To see know our trade organization that we're both a part of. This is something we should be working. I don't know that we need to go and combat it. It looks bad if you're just trying to say renters don't have rights because that's not the case here. But the other part of this is landlords have rights. And why are rents going up? No one is asking why. Everyone is just seeing and it's almost a knee jerk reaction. And if we're not involved, if we don't start speaking up, then it's going to be dictated how our business runs. And I think that would be bad for the industry.
Brad Larsen: Well agreed on that. So we need to really kind of paraphrase what's going on here. So I can't remember the exact date, but it would have been maybe 30, 45 days ago. The Biden administration came out with a proposed tenant bill of rights and he just basically threw it out there. There's there's been no debate in the House or the Senate on this. It's not been proposed as an actual bill. And what's scary is that it could be just put into legislation as a as a as a fiat, just basically a presidential decree. Right. An executive order that all of a sudden all of the three letter agencies that we are fearful of start to take action upon this and dictate their will. And so it's very scary that the federal level is getting into this point to where they want to push into action, this renters bill of Rights. Now, let's kind of break this down. What does it all mean? Like, what are some of the outlines that they're talking about? Give us a few talking points there.
Brian Phelt: Yeah. So looking at this thing here, save quality, accessible, affordable housing, we don't control the market as far as pricing goes, but that's what they want. Clear and fair leases. Education enforcement and enhancement of renters rights. The one that caught me was the right to organize because I don't understand. What are we creating a football team? like What are we doing? Eviction prevention, diversion and relief. So some of these things a lot of us in NARPM already do. We try to provide education. We have very clear websites or leases are very clear. So again, I'm curious, who is the culprit that's bringing this up? Right. We know that markets have taken advantage of the fact that. Rents are. There's a supply and demand issue. So they just raise the rents. Right. But who is doing this? Is this happening from narpm companies, professional companies, REITs that are running their own stuff? Like I'd be curious, what is the source because that wasn't asked this just as a blanket reaction to items that are not happening everywhere. And San Antonio, you and I are both here. We don't we're not raising rents, $1,000 at least renewal. So I don't know where this is coming from.
Brad Larsen: Yeah. I mean, there's some things in there that are pretty broad and can be interpreted ten different ways, much like our property codes. You know, it's really always up to the ruling judge on how they want to interpret that particular law. And so this is very vague. What scares the heck out of me is it could just be enacted by a decree, by an executive order and put into action, and then it would take a Republican held House to refute it. And that may get shot down in Congress and still pushed into law. And so it's a very scary situation because it's eliminating the free market. If you remember what was going on with the eviction moratorium and if you remember, our very own Robert Gilstrap fought that he went to the basically to the Supreme Court. He filed a lawsuit on behalf of himself and another owner. And they got together and they filed an actual lawsuit. I don't know where our trade organizations were, where was any are, where was NARPM? I don't know. They were sight unseen in that regard. But it took one of our own to fight it on his own, on his own dime, to go all the way to the Supreme Court to get the eviction moratorium he had.
Brad Larsen: He earned a stay on it, which basically means a judge says, we're not taking action on that. We're stopping it from here. I did a podcast on this with Robert, and so I got to understand it a lot better after that podcast because. Really it was it took a grassroots type of an action to stop the feds. That's the crazy part. They have so much crazy power that it goes against common sense sometimes. So if you're if you're a conspiracy theorist like me, maybe they're just pandering for votes. That's a lot of it. You know, they're going out to say, hey, we're now on the side of the renter because we feel the renters are 52% of the nation and 48% are homeowners or whatever the state of home ownership is. They're looking at the simple majority and saying, well, let's go after that class and pander to them. Basically, we'll pay off their student loans and we'll give you free housing. And, you know, this will become a socialist utopia. I mean, is that what they're doing here? I mean, what are your thoughts on that?
Brian Phelt: Well, it's kind of what Scott Brady's brought up several times on your podcast is people are finally starting to notice this, right? This industry was under the radar forever. It was redheaded stepchildren. And now everybody that's got money is looking here. And now that the dollars are flowing, now the evil eye is upon us, right? Kind of Lord of the Rings style. And they're looking at us. And my concern or question would be, how are we performing as an industry? You know, are we and I'm not saying that we're supposed to get together in antitrust and do all the same things, but are we doing common things or are we educating? Do we give out educational stuff? Do we teach renters how to become homebuyers? Do we show them how to fix their credit? Some people are and some people are not. So you've got this divide within the industry. Half of us are trying to be progressive and offer a lot of stuff, and then the other half are saying, Well, we'll work. 20 years ago still works today. And how do we how do we fix that?
Brad Larsen: Following protection, safe comma, quality, comma and accessible, affordable housing. Who's to determine that? Right. So they're going to hire a housing director that says this place is not safe, it's not quality, and it's not accessible to affordable housing?
Brian Phelt: Well, the problem is we already have that. We have that in San Antonio. We have right now. I don't have any problem with knowing that people need help, and that's why we do what we do. The problem doesn't become the people. The problem is the red tape to get to being able to help people. It's very frustrating. And owners will ask us all the time, you know, should I allow Section eight? I say, that's the choice on you, you know, But I can tell you, the last time the government shut down our Section eight checks didn't come for six weeks. So can you float this for six weeks? Can you float it for three months? Are you are you willing to do all this stuff they're going to ask you to do That's above and beyond because we don't run slums to begin with. But they're still going to come and find a way to ask you to do something That that is the frustrating part is we've seen what happens when government gets involved in housing and it makes people not. In this article, it even spoke that in the areas where they raised, where they brought in rent control, that investors just pulled out of the market. You literally created a housing crisis overnight because investors didn't want to deal with the headache or. Yeah, if you tell me, I can raise it 5% every year. Well, instead of not raising rent like I wanted to, I'm just going to raise it because I can. So now I'm forcing people to pay more because you told me that I can. Why would you do that?
Brad Larsen: Let's dig into the rent control now. Because I was going to save it till a little bit later on, because that could be the this is like the slippery slope. This is the gateway drug to get to rent control. But let's talk about rent control is like a scary end result of some of this Bill of Rights that goes through. Now, some of the things they talk about, I'm fine with I'm actually okay with a little bit more legislation and we can talk through this. But let's talk rent control specifically and the bad things. So if we look at the markets that have implemented rent control, New York, San Francisco, some of the others, California, the East and West coasts have done this. And they put the speed limit on how fast you can raise the rent and that could be 5% per annum, whatever. It's going to be 5% lease agreement. That means that every single landlord will raise the rent 5% every single year. It's not if it's not, the market dictates it. You know, if if there's all of a sudden a huge demand in housing, they're going to raise the rent.
Brad Larsen: Well, let's let's think about maybe 2% or 3%. No, they're going up 5% every single year. They will never skip a beat. And so when the market dips like we might see right now with lowering interest rates. Right. And potential population shifting, maybe there's a market dip in certain places to where too bad we're still going to raise the rents 5% every single year. So what it does, as you mentioned earlier, is it causes investors to pull out, which means there will be no more affordable housing projects. No one's going to want to go into a market with rent control, spend their money and put themselves at risk by local government and all of their willy nilly legislation that they just pull up out of thin air and decide to put into action. No one's going to want to invest in that type of a market. Where are they going to go? They're going to go to the open free market states, correct? That's one of the problems. I mean, what did I miss from rent control? There's so many bad things about it.
Brian Phelt: Right. I mean, between that or the fact that people will just like you said, they'll get priced out. I'm looking at Texas for you and I, that our property taxes don't have a cap if you have no homestead exemption. Right. Most of our investors don't have that exemption. So if the taxes are going up, why would you keep your house here? Does it make any sense to invest in Texas? I'd rather invest someplace else because our.
Brad Larsen: Hold on out there. Don't get me. I'm going to get my cowboy hat on. Stop right.
Brian Phelt: There. Get it? I've got.
Brad Larsen: One. Our fantastic our fantastic governor, Greg Abbott, has a $30 Billion surplus in the state of Texas right now. One of his proposals is to lower the property taxes. And so we're looking at as the state. Now, I want you to listen up all you blue states out there. We have a $30 Billion surplus. California is probably in the hole, $10 trillion by this point. Right. They just they overspend. And so what do they do? They try to tax people. Tax people, tax people. The state of Texas is looking at like a way to tax people and limit those property taxes. I get you, though. I mean, the the investors, the first thing we hear is they look at our property tax. They're like, oh, my God, your property taxes are so high. Yeah, you're right. But we have really darn good schools because of it, and that's kind of a one for one. So it's it's a trade off for sure. And I do think that you make a point that they look at that and say, I'm going to go to a tax free state, I'm going to go to Florida or someplace like that where it's I can't say tax free. Pardon me. I would say a lower property tax state. Right. And then they would go to other markets. And that causes us to potentially lose business. I mean, the same with the airports, right? I mean.
Brian Phelt: It's a trickle down effect. It is. Yeah. It's a huge. And with San Antonio being a military city, too, I mean, we have to have housing available for all these people coming in and out all the time. And, you know, they they can't there's not enough base housing to house all these service people at the end of the day.
Brad Larsen: I agreed. Yeah. And there's so much good things in these articles. I mean, we're going to have to post them in the show notes for people to catch up. There's a Yahoo article that you sent me and then this Bigger Pockets synopsis by this, this one investor who wrote it. I need to see who it was a drop her name or his name, but it just kind of paraphrases everything. The crux of the issue at the bottom, you know, it just shows all the accelerating rent inflation that can be part of this. And again, that goes back into the rent control. Now, I do want to talk a little bit more about some of the things that mentioned in the article, Clear and fair leases. I'm actually okay with that. You know, one of the things that you and I have kicked around is, all right, if there was actual landlord education, meaning that property management has to be licensed, like I know it's licensed in the state of Texas by a real estate license, We get it. But what if there was a distinct property management license and you had to go take 25, 50 hours of exact property management courses like the early hour, two hour PM, their designation courses here in Texas. I think it's a Texas realtor leasing program. I can't remember all the acronyms. You know, I've got them. I wouldn't earn the designation, so I have both of them, but I can't remember all the darn words behind them. Alphabet Soup point being is it was two days of eight hour classroom discussion and Donna Lowry was the teacher.
Brian Phelt: Yeah, she taught me.
Brad Larsen: We were actually baffled. I mean, I was there and you know who does this? And I raised my hand. Who does this? I'd raise my hand and she'd refer to me for all the stuff that we were doing in the marketplace and nobody else was doing it. Like who lets their owners decide which renter they want to choose? And a bunch of people just raise their hand and said, No, we let our owners decide. That's a really good point. Clear and fair lease agreements, clear and fair screening criteria. So if we're looking at that distinct issue, then yeah, it would be great to say that if a property management company is hired and they're responsible for the management agreement and the lease agreement that they are required to be the ones deciding on who you rent to. So you're taking that potential power out of the owners, right? And because that's what they hired is for one of the things that they're proposing in California is they want to inflict mandatory education on every single rental property owner. Think of that. Yeah. Whoa. You're like, Man, you can do that?
Brian Phelt: Well, just thinking.
Brad Larsen: That's exactly.
Brian Phelt: Okay.
Brad Larsen: I know you're thinking through it. I can see the wheels spinning and the smoke coming out of your ears. But the thing is, think about that. So every single owner analysis show up to Sacramento. You have to take a four hour course in person, and they have to get a signed off on by some federal government agency or whomever it's going to be to continue to own a rental property.
Brian Phelt: So if you are using a manager, not a manager, or irrespective of that.
Brad Larsen: If you're not using a manager, if you are, you can defer to the manager like they can do it. So it's like the guy like Scott Brady said, Yeah, bring it on. You know, make every single owner attend mandatory education to own a rental property. And I'm actually okay with that. And I know that sounds very altruistic, like I'm self serving. However, comma, where are the issues that we see in this space? It's the individual landlord screwing over the tenant that causes it a bad rap. It causes the entire thing, a bad rap. They they embezzle security deposits, they don't make repairs. They are the quintessential landlord slumlord. Right. They're the slumlords out there. You know, they're writing lease agreements on a napkin. They have, you know, just do your own repairs and we'll fix it later. And, oh, the air conditioning is out. We'll just go get a fan. I don't have any money this month to fix it. Sorry. I mean, those things are terrible, right? To to rent from. And we don't want to see people doing, you know, have to go through that. So maybe some of that might be. Oc What are your thoughts on that in particular?
Brian Phelt: I would have no problem with that at all. I mean, that's something that Narconon probably should champion. Just educate. You can't educate enough at the end of the day, right? And if everyone is doing something similar to that because you know, the people that are renting from you, sometimes they may or may not know what they're looking at. Right. How do you how do you help people get better in that in that scenario? Because I know Trek here. I think we have a trek lease. Right. That the general public can use. But half the people filling it out probably have never seen it before. You know, if you're not a licensed realtor, they don't know what these terms are. So you had the blind leading the blind, signing a binding agreement between two parties. What is that? That's where we end up with the bad rap.
Brad Larsen: Yeah, and the same thing. Education, enforcement and enhancement of renters. Right. So if the renters rights are to have a competent, fair lease agreement, that also should be going right back into the conversation of one of the most dangerous animals on the face of the planet is the part time realtor writing a lease agreement because they're putting a document that could be in place for 100 years. It self renews over and over and over, and they have minimal, minimal training on any sort of things. With lease agreements. You and I have both seen lease agreements written by part time real estate agents and half the portions are left blank, half the portions are misunderstood. And it's just like, who is this representing? Is this representing neither party in its best interest because it's so full of holes? And we hate to see that because we don't want anybody to get screwed over. We don't want to see the owner get screwed over. We don't want to see the tenants get screwed over. You know, we are kind of like the referees down the middle. That's what a good property manager does. They they make it fair and equitable to most of each side.
Brad Larsen: Granted, we represent the owner, so maybe it's 5149, but at the end of the day, we stand up for our tenants, such as owner wants to go knock on the door and enter the property this afternoon because it just happened to be flying in town, you know. What do you say? You say, Sorry, Mr. Owner, you can't go to the property without 24 hours notice. We have to have confirmed notice. So I know you want to stop by your home that you own that you have the keys to. I know you want to stop by this afternoon, but don't do it. Do not show up at that tenant's door or we're going to have issues. Let us get you permission will accompany you want to walk through and then we'll walk you through that home when the tenant is not there under our supervision. Because you can imagine how that's going south. Knock, knock. I'm here to check on my home. You know, I know that there's some rules in the state of Texas that allows you to do that, but that's just not common sense. You know this. You're a former police officer. What happens in that scenario?
Brian Phelt: Yeah, somebody is on my property. I don't know who this owner is. I shot him because I felt threatened and the law would protect the owner. I mean, the the tenant in that scenario.
Brad Larsen: Yeah, they get it. So. So the enhancement of renters rights. I'm okay with that. Let's talk about some renters rights. The right to have repairs done quickly. Correct. The right to have an annual inspection, the right to have an annual lease agreement, the right to just just have normal basic living conditions tended to.
Brian Phelt: So don't even go in so, so easy as when it's time for renewal. Right. Not springing a renewal notice a week before and raising the rent. Right. Like I don't we do 60 days out you know 6030 to 60 days out plenty of time. If you can't afford it, start looking for something else. We can start marketing or you figure out how to find the money, right? Because at the end of the day, the rent increases are so small it would cost you more to move than it would to stay. That's usually how it works in our scenario, but that's an easy one to put in. That I bet is not happening. A lot of people are. No last minute or spur of the moment or oh, by the way, it just did it. I didn't know I had to do an amendment. So I just raise the rent because I'm the owner and I can't. Well, that's not really.
Brad Larsen: That's exactly right. I tie right into that to that whole argument with the solid lease agreement that they have to use some sort of like not a promulgated form, but some sort of decent written lease agreement executed by someone who has experience in property management. Either they have a property management license through the state of Texas and or they don't. There are some sort of I don't know. They have to abide by the renters rights, as they say, and I'm actually okay with a lot of that. So another one would be standardized late agreement. So if you're late, you will pay X. I know they just introduced this in the property code, so it's somewhat somewhat sort of standardized, but it's more like a cap to it. So they can standardize. Yeah, it's cap. I think a standard late fee would be more easier to understand. Same thing with I mean, you could talk all kinds of things in and around a enhancement of renters rights. And it really does make a lot of sense because if it were you renting especially that that notice to enter a property, if it were you renting, we'd want plenty of notice. We would also say to limit that right limit that that type of a walk through to twice a year or once a quarter.
Brad Larsen: I mean, limit that to where you don't have an overzealous landlord wanting to walk through your property once a month. See, So so renters rights can go a lot of different directions. Now, another part of this is kind of wacky, the right to organize. I don't think we you know, that's not something that's really needed. If you really want to get together and pick it, you know, go ahead. But let's let's get realistic here and do something that's not mob forming. Let's do something constructive. Right? The right to organize equals mobs equals riots equals people getting hurt. And so I don't advocate that. But a enhancement of the renters rights make a lot of sense. It is the last one, you know, the eviction prevention, diversion and relief. Whoa, This is this is where we're going here, right? Evict prevention. Come on. I mean, that's one benefit to the state of Texas is how quickly we can evict. So for the audience, paraphrase the time frame of what we have to deal with in our evictions.
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Brian Phelt: If it's not under the CARES Act, we're still dealing with that in our courts here. But three day notice after we just use an attorney to do everything. So three day notice goes out. They don't do it. File the eviction. We're in court within two weeks. We're. 99, actually. We never lost. We're always going to get a judgment because we have everything lined up after we get the judgment. Five day waiting period. If they want to appeal, if they don't appeal, then they're still there. File for the writ of possession. And then we have a sidewalk party within about a week.
Brad Larsen: Sidewalk during the.
Brian Phelt: We take all their stuff, put it on the sidewalk, 24 hours. They don't come get it. Then we just hold it away.
Brad Larsen: So it's a speed lane is what we're what the paraphrase is. And I agree with you on that, because it does give us a little bit of assurance that we can have some some form of guarantee that we can collect the rent if we don't collect the rent. It's kind of like, here's your carrot, pay the rent on time or here's a stick. You don't pay your rent on time, we're going to evict you. And tougher markets like in the West Coast, for example, they can't evict, right? Evictions takes six months. And so you threaten eviction to a tenant. And what do they say? Whatever, you know. Fine. Go ahead. I just want to pay rent and then I'll go into a judge and claim COVID, catch up on my rent or mitigate my rent, and I'll continue to stay in the home. So it goes back to screening criteria. So if you're making the screening criteria so limited. It hurts the affordable housing concept because not everybody can afford or have the clout to get into a 800 credit score only home. You see. And so all of this has ramifications. At the end of the day, the consumer ends up paying for this. So if you put a licensing act on some sort of each rental property, what is that landlord going to do? They're going to just simply pass on that fee to the consumer, right? A certain tax.
Brad Larsen: They pass on that fee to a certain individual, like a short term rental tax. Right. That's that's one that's kind of become a new thing in our space is if you have a short term rental property, you will pay a short term rental tax not to the state, not to the federal government so they can give it all to Ukraine. You have to pay it to the local market, to the local city council, the hot tax. And so where is that going? That's just going to go into the city coffers. And what are they doing with it? Who knows? Right. But it's just it's just a BS. I get having a license, but to try and tax the rental proceeds, you're getting, you're getting a little tedious. They're a little little ticky tack. And so in the end of the day. That owner passes that tax along to the tenant. So if you want to talk renters rights, they need to eliminate the ability of local markets other than state or federal to pass any sort of tax law on top of that particular landlord, on top of that particular rental property. Because what it also does is it causes people to hide those rental properties. They'll claim them as homestead. Right. And they won't be honest about stuff because what's the ramifications? Either I pay a $200 fine or I pay $200 a month in a short term rental tax because I'm renting it out on a short term rental.
Brad Larsen: You know, you still look at it like that. Well, let's flip a coin, because I'd rather run until I get tackled and I'll pay the $200 a month short term rental tax If keeping it as a homestead saves me this much money on all the other taxes that I have to pay. So there are ramifications to every single tax that they pass. People will find a way around it. It's not breaking the law. It's playing with the law in certain aspects, like the tax code. If you comply to the tax code, you're not dodging taxes. You're not avoiding taxes. You are basically you are playing to the letter of the law. Right. They always beat up politicians for this. You know, let me see your tax returns. Let me assure you, you paid all your fair share. Well, what's your you know, if you're complying with the law, your fair share is your fair share. That's there's no end around that. What am I missing on this? Because I know I'm blabbing on about nothing. But some of these are hot button stuff. And I want people to understand there are trickle down effects to it.
Brian Phelt: I think what we're missing on this side is the landlords don't have a seat at the table. I mean, eviction prevention is you would pay your rent. But I don't see anything here that says the average landlord does not swim in money. Right. That missed payment is now taking money out of their family and putting them behind. I've yet to see a study to see how many landlords had to file for bankruptcy or for foreclosure because of all the COVID rules. There was nothing out there to help them. They had to apply to get money for someone who got free money, who broke an agreement. This seems backwards. I asked somebody. It was. I said, Why would you not just pay the note servicer directly with no markup so that the note is paid? The renter can stay in, the landlord is not harmed. That's so simple that it could have just been done immediately. Instead, you went all the way to one side and you left the landlords out to dry, right? Because not all the landlords are these big VC backed companies. A lot of our landlords are military service people for us. Been in San Antonio or they're just moved to a different house. But they lived there for 30 years and that's going to be their retirement income. And now someone stuck there and they can't get them out. They don't know what to do. Then of course, they're all coming to hire us. And we're like, Well, what do you want? What do you want us to do? Like we, the laws are still locking us in place as well. So there's nothing here bringing us to the table because a lot of us could help educate and create a better Bill of Rights, I think, because of our backgrounds.
Brad Larsen: Yeah, that was the frustrating part. During the eviction moratorium, they were just basically giving the tenants all these new rights out of nowhere and they could have blanketed the mortgage companies, the banks, and said if if they submit a form and their tenant is hiding under the eviction moratorium, you need to give them a mortgage moratorium, right?, defer their mortgage two months or six months or whatever it is, because they're getting put in a bad position. I know you could argue that all these investors, they should have three months in reserves. And it's you know, it's not it's not the tenants fault. They have a mortgage, you know what I mean? I can't rent your mortgage, which I learned from you. I learned that saying from you, man, I can't rent your mortgage. You know, great saying, by the way, because you told me that I'm like, that's perfect. I got to remember that one. But the point is, you see, it wasn't it didn't address all sides. And this was the case that Gilstrap made when he went to the Supreme Court as he had a couple stories like that where it was investor by name and the investor has a mortgage through X and the tenants not paying.
Brad Larsen: So now the investor with a mortgage has 10,15 thousand, 20,000 in debt to the to the bank. And the bank says pound sand. Pay me. I mean, it really is a bad situation. So what are you supposed to do? You end up in a foreclosure, you end up in a, you know, going to beg the feds for money. And it was a really awful time. And I think people are forgetting how rough that was on all parties by creating this renters Bill of Rights. Now, it's not enacted yet. It's a, you know, a far left agenda item that was thrown out there. I think to just basically pander for some votes. And it goes back to elections. Elections always equal money. And you follow the money trail and kind of go from there. Now, this has turned into a political rant on my side and some of our discussion points. And, you know, maybe you agree, maybe you don't.
Brian Phelt: It doesn't matter really which side of political spectrum it's going to become political. Right. If you're not saying it, someone else will take it. In this article, two senators were already quoted as saying it's not good enough. That's already the scary part, because you're asking for all this stuff only one sided and you want more. So if it doesn't get passed now, it'll get passed at some point, but it's going to come into someone's ear. Someone's going to use it as a launching platform. And our our industry has to be ready for this. You know, the question is, you and I are on here. What is our industry going to do to prepare for something like this? Are we going to be proactive and say we want to work to make this better, or are we going to wait until something gets passed and to file lawsuits and think if we're proactive, it's a lot less expensive and it looks a lot better as professionals we should be. I don't want my renters to be dumb. I want them to be knowledgeable. I want them to know their rights. But let me have a say in forming this Bill of Rights that is one sided right now. And I think I don't think it's sustainable. So I'd love to see NAR plus NARPM ideally working together. You know, there are whole differences about licensing and who's not licensed at this point. This is about housing and this is about people. Both industries want to make sure people aren't homeless, so why can't they get their differences aside and work together?
Brad Larsen: Agreed. And that's that's another part of it is a lot of folks don't understand the political background behind this. Just in our organizations that we mentioned, you and I are both realtors. You and I are both part of NARPM. And it's kind of maddening that they can't work together. Now, I know people that are screaming at the radio right now saying, NAR, the most evil thing ever, right? NAR is terrible, blah, blah, blah. Well, ok, but they're big.
Brian Phelt: They have a voice. They have a voice.
Brad Larsen: They have a voice and they've got a lot of money. And so NARPM in, in all honesty, should be tucked right underneath NARs right wing, and they should be hiding and trailing everything that NAR does. For whatever reason, they can't seem to join forces. A lot of it is you mentioned is the licensing because some NARPM members are not licensed in NAR can't have that. They all got to be licensed. I don't know what the problem is. At the top level, it's maddening because both resources should be combining to represent our organizations together and they're not. And so I'm sure I'm going to get all kinds of hate mail from people saying, Get involved, get inside of NARPM. We'll have attempted and, you know, it doesn't work like that. You just can't walk in and say, I'm not part of the leadership. You have to work your way up from the ground floor. Now, that's not all that's being good. But we also have a pretty large surplus, and I feel that needs to be put to work at the state level and at the national level. And what that means is dedicating resources, dedicating people to lobby on behalf of our organization, which really is representing landlords in general. Right. And if we could just bring the factions together, there would be so there'd be so much of a loud voice.
Brad Larsen: That's the other thing that is a detriment to individual landlords is they have zero voice, right? They don't have any sort of means. If we all of a sudden we're Australia and we had 70 80% market share into individual landlords, meaning that seven out of ten, four out of five landlords use a professional property manager, their voice would be heard. The Australian lobby is huge on behalf of landlords and property managers. They they have it down. So if there's going to be any sort of legislation passed in the country of Australia and or New Zealand, they at least have a seat at the table to be heard versus I don't know if we do, we have some pretty good folks like Tyler Craddock. He's he's doing his, his what he can do with his limited resources and time and space to influence them at the national level. You know, he goes to all the stuff that's needed. He does all the right things. He's a super guy, but man, we need 25 of them. You know, we need 50 of them. And that's that's the point behind this is we've got to have more because if this sneaks through the cracks and all of a sudden, just as you mentioned, it's past now we're reactive. Now we're filing lawsuits. Now we're going to go after it.
Brian Phelt: That is that's counterproductive because when you're filing this lawsuit, you're going to be painted as the enemy. And we're not the enemy. We just want to have a say. But now is the time to speak. Yesterday was really the time to speak. And so when I was state president for Texas, I wanted and asked for National to give us a lobbyist. I don't want a virtual assistant or anything like that. Give me a lobbyist, because we have five major metros here. We're huge. We're one of the largest states. We have everyone moving here from East Coast, west coast, north. Everyone's moving to Texas or they're moving to Florida. Those are two hot spots. So both of those places have national or they have state level NARPM chapters and they should have a lobbyist assigned to be able to take care of all of them, because then once you get into our different metros, every one of them runs differently. Austin is completely different than San Antonio. They're not in day and somebody's got to know the difference between those two. We have great leaders here in Texas that have made working with our local associations very well, Right, Donna? Jim Smith, Mike Mangan. They have paved such a great road that other states don't have like we do. So we could always just sit there and say, Well, Texas is going to be fine, but I don't care. Just about Texas. Care about the industry. How do we make everybody have those kind of relationships?
Brad Larsen: So it's an easy fix. Maybe I'm just too simplistic in my in my overly simplistic mind, but what if NARPM had a say with every NAR representative? I got to assume maybe. I don't know. But NAR has some sort of state representative for every single state. Right? I'd have to assume that that someone is assigned to represent the state of Nebraska or the state of Wyoming on behalf of NAR and or region. Even a region could be sufficient. Well, if NARPM were tucked up underneath that, we could potentially have a voice at every single state about the property management issues for investment landlords, and we could infuse what we need to see or we want done or we want prevented, done at every single state level. And so what does that take? It takes money and what do we have? We have a surplus. So it's time that we reorganize and spend some of that money and start influencing our industry for the positive. I mean, it really is. It's it's kind of maddening that we're just sitting on all this cash and we're not doing anything with it. They've really gotten a handle on perfecting a lot of the things that we do with the education. I'm a NARPM instructor, so I firmly believe in the organization. They've got the NARPM accounting standards. They put on a dozen conferences a year and they make money almost on all of them. And so it's time to figure it out, to influence back into the local and national fronts. On this particular realm. We don't do it now. It's going to sneak up on us and bite us. I think we've got to get something moving. What are your thoughts?
Brian Phelt: I completely agree. I am a contributor for Tree PAC like Texas Political Action Committee. I've got my little flyer back here that I need to do for NARPM this year, But I donate to the PACs because I know they're important, you know, and everybody has their opinion on them. But at the end of the day, business is done behind the scenes to make these kind of things happen. Right. So if we're not behind the scenes and we don't have the money to do it, then we have no one to blame but ourselves. Right? So it doesn't cost that much to donate to NARPM at least $25. I mean, that's that's the easiest money that you could ever give. And then stacking that up with a plan becomes something at the end of the day. But yes, we should be we should have started on this before it became an issue. I think as an industry we should have seen this was coming during COVID. I mean, the writing was almost on the wall. You painted everyone as victims of landlords, even the landlords. You know, all of us had our hands tied.
Brian Phelt: But now that we're kind of out of that, we should now become proactive. This whole year should be about making sure we're educating. I personally here at some of the real estate associations, I do mentor landlords that self manage and don't end up coming up, but I'm like, I tell them if you do bad, you're going to kill all of our industry. So I'd rather give you guidance and have you do something good, then do something bad, and then you're hurting my reputation because that doesn't do anyone any good. Or you end up harming a tenant and giving them a bad rap because now they paint us all the same way. Kind of like when I was a cop, right? If one one does bad all of a sudden, you know, every day you just go out looking to hurt somebody. It's not true. But that's just the narrative that gets picked up. That's this whole article is nothing but a narrative about people who had a bad experience. But it's out shadowing all of us to do good every single day.
Brad Larsen: On a tactical level, what are your thoughts on leasing only?
Brian Phelt: We do leasing only, but it's very restricted to where owners are. Kind of like, Can you help me with this? No, that has knowledge. There's a there's a fee. So we're going to find them, we're going to screen them. We're going to give you parameters of what they meant and you're going to say yes or no. And we're going to drop a lease, we're going get the money and we're done. Don't ask us anything. It's very cut and dry. It makes us good money. But then it becomes I don't know what to fill out here. I don't either, because I didn't get paid to fill that out. Right. But if you would like to move to this plan, I will magically remember what the number is and I'll show you how to fill that out. But there's no guidance given. If you're going to self manage, if you're going to self manage and lease, only then that means you want to be the professional. You can have this knowledge for free.
Brad Larsen: Yeah, we kind of feel the same way. We we started, we stopped, we looked at doing it again and we started it and we kind of dropped it. Since we don't do leasing only right now, but we have in the past and a lot of reasons because the owners were trying to stiff us, right? We saw that many times. You try to charge half up front and then you find them a tenant and they magically find a tenant from somewhere else and they start working with that tenant and they don't pay the rest the lease or they don't pay the rest of the agreement. So word of the whys, if you're ever going to do leasing, only get everything, everything, everything up front. And then if they decide to rent to their sister in law from church, go ahead. I don't care. Whatever. It's your deal. But you paid us to advertise. You paid us to help you write a lease agreement. If you want us to screen somebody, fine. Sign here. Here's all the disclosures that you hold. The security deposit. You are holding us harmless. I mean, there's a lot to it because if it gets into any sort of legal battle, legal battle over a security deposit, we could be implicated just for being involved.
Brad Larsen: Right. And that's a that's a really crappy part. Same with maintenance or some sort of, you know, fair housing complaint. We could be implicated just for being involved and having our, you know, even a rubber stamp on a lease agreement that the owner uses. So it's very you know, it's 5050, like you could do it, you could not do it. You could make arguments to do it as a gateway drug to get the the owners sign up for full management. You could also say we're not going to do it because we don't want to help the owners do that on their own. You know, there's like all 5050 on it and I just want to throw it out there because you start thinking about, well, why don't we try to help the landlords? Let's just do leasing only, Right? And you know, Yeah, okay, I get it. But you also want to do what you're good at and maybe. Maybe it's not right for you. Now, another question. I'll throw down Bach. Sturgill, I hope you're listening. First. First applicant in the door that meets your screening criteria or the best applicant in the door that meets your screening criteria.
Brian Phelt: Ours We do based on whoever is whoever meets the qualifications. I know your story and how you've done yours. We've always been standard that way as long as and when I say they meet all of it. So if someone's got everything in but they didn't do a pet screening profile, for example, if that's in my criteria, you didn't do it just not complete. You move to the next one. It is what it is. If you can't follow instructions up front, I can't help you because it is pretty clearly spelled out right. But if they meet all the criteria, even if there's risk mitigation or whatever the case may be, we will give them a conditional approval. And as long as they say they accept it and they do everything you know, then we'll go forward with it. It hasn't been us. I always told somebody if I could predict who I'm going to evict, I wouldn't be in real estate, right? I'd be running a lottery or something like that. So you never know. People with 800 credit score moving in, get divorced, find their wife, cheated on them, and then a broke. I mean, it happens. It happens, whatever the case may be. So we are as we do based on their my my concern with best is that I don't know what criteria I'm using for best for me. And it could open up a can of worms. Right. And that's not a risk that we choose to take. Now, I've told people every company does theirs different, but if they're consistent, that's really what I think people are looking for is are you applying this the same throughout? Right. I think your company does your company does best qualified or something similar to that, correct?
Brad Larsen: Yeah. We take the best applicants. And I want to say this up front. There is no right or wrong in this. In my opinion. You could argue with me all day long, but if you have a written set of standards and you abide by those set of standards and you tell everybody up front that we choose the best applicant, not the first in the door, that's really what I think works for us. Because if I run the other side, if I was the owner and my company's managing one of my properties and I have the opportunity to pick from the 800 or the 600, you know, which one I'm going to pick. You know, you take the kernel or the struggling mom with two kids, you know, you're going to what are you going to take? Right. It's because you would want the same for your property, same with selling. You can make that argument. Okay. Which offer are you going to take when you're selling a home? Correct. You know, you could make the exact same argument because it's not just price, it's also price and terms and and the state of the market, etc., etc.. I just want to hear you painting on that. There's no right wrong. You know, I'll get more hate mail for that one than anybody else.
Brian Phelt: Again, what you said, though, if you're consistent and you can show, I think that's all that matters. Because again, it's not like you're hiding this is it disclosed up front that just because I'm first doesn't mean I'm going to get picked if you disclose it up front. I mean, what what is there to get upset about? Right. That's a risk someone has to be willing to take. Like our properties. You may have six people apply. If we run the first one, I'll refund the other application fees because I don't need your money. But that's how we we run ours. And I don't hate on anyone that does it differently. For some people, it's once you pay, you can either try another property or it's not refundable. It is what it is. As long as you disclosed it. That's all people need to do is be up front. Right. And that's kind of like with this Renters Bill of Rights. Some of it is we are disclosing everything and you just don't want to read it. Well, what am I supposed to do at that point? I can make a video and then you're going to say. There were no subtitles. And then you're going to say it wasn't in this thing. You could go down this rabbit hole of what it is, but it's like, for us, it's on our website. It's before you even start the application, and then it's in the lease. So you've seen everything three times, and then you're still going to say, Why am I being charged to this? Because five signatures ago we told you about this and it's everywhere.
Brad Larsen: It's circle back. Great. Circle back point, because you're going straight back to this renter's Bill of Rights. Okay. What good does it do if we have a renters Bill of Rights, if you want to call it that, when we put everything in front of you in writing six times and you still don't understand it. So great point. Circle back on that. Yeah, well done.
Brian Phelt: Well, it becomes frustrating. So in our scenario, we're working on okay, we're going to start doing video, but like when we when we have people sign a lease we implemented two years ago that we send them a summary recap of all their charges for moving and all their monthly charges and we have them sign off on that as soon as the lease are signed. So that there's no because what we were getting was I didn't realize, I didn't realize I'm okay. Look, you don't want to read through the 15 page lease. I didn't want to make it that long. I just had to put all that stuff in there because the law. I don't want you sue