Latest / Real Investor Radio Podcast / Ep 45 | Protecting Property Rights: Addressing Squatter Issues and Eviction Updates in Maryland
Transcript
- Craig Fuhr (00:13) Hey, welcome everyone to Real Investor Radio. I'm Craig Furr joined by the ever awesome Jack Bevere. Jack, how are you today? Jack BeVier (00:19) Good morning, man. Great to see you. Great to see you. Craig Fuhr (00:21) Jack, I just want to do a couple quick takes today on some stuff. So you sent me a couple days ago an update. You're a member of the National Rental Home Council. This is a body of very sort of larger investors of single family and I would assume multifamily as well. Jack BeVier (00:41) No, it's really just a single family. Multi-family has got their own trade organization. So you had maybe six, seven years ago, the National Rental Home Council was formed by, as you mentioned, the largest single family rental owners, think invitation homes, American Homes for Rent, guys like that. There really wasn't a trade organization for them. And they've been getting a lot of attention and as a result felt that they needed a trade organization for advocacy and organization. And so it's a pretty well-funded group. Um, and they're paying attention to legislative issues on both the national and state levels. And they have, um, they're starting to work their way down. They started a couple of local chapters recently. I think there's one in, um, in Atlanta, another one in Arizona. And so they're starting to open up more local chapters and kind of come down to main street. But the work that they're doing is, you know, focused on anything that, um, smaller landlords would be, uh, you know, affected by. as well. So we're a member of NRHC. We're probably one of the smaller members there. But I've been paying attention to their legislative work. And so yeah, they put out a kind of an update on what's been going on around the country. Craig Fuhr (01:56) Yeah, it's pretty the email that you sent was great because it kind of bullet points state by state, some of the more pressing issues that I guess, you know, members of the body could be experiencing or are perhaps experiencing in their businesses, Jack. And as you mentioned, the members of that organization are some of the largest, you know, sort of institutional and I guess non institutional. single family owners in the country. And so, you know, let's tackle the first, it appears to be two major themes to their last legislative update, Jack, and the first of which is squatters. And so, you know, I don't know when this became such a, you know, top shelf issue in America, but it seems like every day now I'm hearing stories about, you know, this state, that state, having problems with squatters. And so Georgia, Arizona, and Texas. legislators are all trying to pass bills right now to protect homeowners against squatters, Jack. And prior to the show today, I was able to pick up a couple stories. I'll just read a couple here, a couple paragraphs here real quick from USA Today, very recent article. In Texas, a homeowner says she was locked out of her house by a squatter who claimed to have a lease after moving to the state with her family. The woman had already been evicted from three prior homes, Jack. in Maryland where we are, a woman returned from vacation to find two squatters in her bed. They were not only living in her house, Jack, but also sold about $50,000 of furniture. That's a lot of furniture. So obviously, Jack, this is becoming a front and center issue. I think that it's only going to get worse. And so the NHRC highlighted what some states are doing. to legislate, I guess to protect homeowners in America. Jack BeVier (03:50) Yeah, the I've seen the I think there's like a pop I don't know if it's on YouTube or on HTTV or something. But there's like a show now that has this that features this company that are spotlights this company that will like get squatters out for you. So like you can call them and their job is to go deal with a squatter situation. And they'll like and some. Yeah, yeah. Craig Fuhr (04:04) Ciao. It's like people exterminators, Jack. It's like call, Orkin is gonna start a new subsidiary just for squatters, Jack. Jack BeVier (04:17) Well, you can imagine that's like phenomenal TV, right? Like seeing somebody kick somebody else out of a house and these guys are like aggressive, no fear. Like that is a dangerous, dangerous job, right? I've also heard like here locally in Maryland that there's a small company that's come up that you can hire them and they will send someone and they will move into the house with a lease. So you sign a lease with that person. Craig Fuhr (04:28) Oh yeah. Jack BeVier (04:42) that you have a squatter in your house, you sign a lease with this other person, they get inside and they're like, Hey, I live, you live here. I live here too. Here's my lease. And they just live with the fricking squatter until that squatter is just like, Hey, this isn't what I signed up for. And like moves out. I'm like, dude, that is freaking aggressive. Like that, you know, in certain locations, like that is a ballsy, um, business model. I'm sure it's quite lucrative for them, but man, you're really, you're really going, you know, looking in the whites of the eyes there of, you know, of, of someone who's, you know, a criminal who's broken into your house. Like I applaud them. Craig Fuhr (05:10) Alright. I think the primary concern here, Jack, is that there's this notion that there's squatters' rights or sort of what's the other term where if somebody lives in a house for like, say, 10 years, adverse possession, I believe it is, Jack. And so what the NRHC council was highlighting was like in Georgia, for instance, there's this process, Jack, and you know better than most about the process of eviction. Jack BeVier (05:32) Mm-hmm. Craig Fuhr (05:48) However, for some reason, these people who don't pay anything, live in your house for free, you would think it would be a fairly easy process, call the police, get them out. But but evidently, in some states are not so for instance, in Georgia, they're actually trying to pass a law jack, HB 1017, to provide a more efficient and streamlined path for property owners to remove I just don't frankly understand the world we live in sometimes, Jack, where these folks have rights and I just can't open my door and say, get the F out, you know? So that's Georgia. Jack BeVier (06:23) Yeah. Our experience has been that like, um, like, you know, we'll, we'll go to a house, you know, houses on the market staged. Like that's like a concern about staging now, right? Like you stage, you're just furnishing it for the squatters, right? Like they. Craig Fuhr (06:36) I have the greatest story ever, Jack. Can I share? So for those of the listening who don't know, I used to rehab and flip houses in Baltimore back in the early to mid 2000s and did quite a few sort of in the outer edges of Baltimore city and some of the larger single family detached houses. And so we would go into these big houses, kind of make them brand new again. Jack BeVier (06:39) Hit me, yeah. Craig Fuhr (07:02) and I would do these Taj Mahal rehabs. Remember, Jack? I mean, they were really upscale. Fred taught me the business of making houses really nice. Jack's partner at Dominion. And so I'm up in this little, where I grew up, which is Parkville, Maryland. I'm doing a house right off of Harford Road at Jack, and the house is done. Staged, gorgeous, and on the market. And at the time, I was also coaching people on how to do the same. And so I was taking one of my coaching students into this house, Jack, walk up the front steps. We can see in the front door because there's a window in it. And I literally see like a shadow run across the house. And the house was actually owned by a funeral home that was right next door at the time. And Jack, I get the six, the hair stand up on the back of my neck. And I'm thinking like, what in the hell did I just see? So we then go around the back and there's a girl who comes bolting out the back door. what we discovered was and I tackle her to the ground, tackle her to the ground. And I'm holding her down and I'm like, what the hell are you doing in my house? The the student who I was with who I was teaching at the time called 911 and the police were there like within minutes. And I'm at the girls on the ground and the cop rolls up and she goes, Oh, Teresa, what are you doing knew this person by name? And says, and says, Jack BeVier (08:02) Dude, are you serious? You're kidding me. Craig Fuhr (08:24) Sir, we have it from here. We'll take it. And I was like, did you want to press charges? I was like, just get her out of my house. She broke a window, got in and was a prostitute using my house, Jack, as her place of residence to entertain guests. And when I tell you the trash that was about the house that comes as a result of that transaction, used all the towels that were there for staging. And so I've got to believe with all the transactions you've done, Jack, that you've seen. Jack BeVier (08:35) Thanks for watching. Hmm. Craig Fuhr (08:54) you know, squatters, folks, you know, being in your houses. So there's gotta be a great story amongst all of your years of doing this. Jack BeVier (09:03) You know how flippers sometimes they'll name their rehabs? You should call that one the bunny ranch. That should be the name. Craig Fuhr (09:06) Yeah, I used to. Yeah, so that was interesting. No amusing anecdotes, Jack, from all your years of doing houses. Jack BeVier (09:11) Man, that's. Uh, I've, I mean, a lot of just like we've had, I've had lots of those experiences. Um, and it's, it's crazy. Cause like the fact pattern can go either way based off of like, you know, we'll go there, we'll be like, Hey, get out, you know, get out of my house. Cops are already on the way. Sometimes people are just like, whoops. And they just like, you know, they don't want the attention and they're gone. They're, they're on their way out. Other folks will have these like, you're like, no, no. Like I signed, I signed this lease and. Sometimes it's sincere, right? Like there was a period of time, maybe six, seven years ago, where there was like a string in Baltimore of scammers who were doing this and actually taking people, right? Like where the squatter was actually a victim who actually believed that they had signed a lease, they handed over a... Yeah, yeah. And it's just, you know, they responded to some Craigslist ad and like they had bad credit or an eviction on their history. So they were like happy to like... Craig Fuhr (10:04) with a legit landlord, yeah. Jack BeVier (10:13) give somebody a thousand dollars and get a set of keys. But they didn't actually know that they were squatting. And so we've had that situation. And sometimes those folks just have left because they didn't want the trouble. And other times they're like, hey, I signed a lease here and the cops are like, you're gonna have to take it to court and that person's willing to wait to get evicted. And then other situations we've had where, yeah, and then other situations we've had where Craig Fuhr (10:34) Oh, you know what you... Go ahead. Jack BeVier (10:39) You know, it's obviously a scammer. It's a bullshit lease. It's like a page like, you know, nothing filled out like, you know scribble on the landlord you know under the landlord name and And then and then it comes down to what the cops like do the cops believe them or not, right? and does that particular cop like Care Enough to like take the risk I guess personally that he's making the right judgment call and some you know Some of them just are just like they just completely punt to the court system Others are just like, no, get the hell out. Right. And so it's very like cop dependent, frankly, in terms of your success rate on getting squatters out. So we've like, one, you know, you know, one that was like, obviously bullshit. We've called the cops. They've showed up and said, Hey, yeah, you're gonna have to take this to court. And then the next day we call, we come back again on a different shift, call the cops again, get a different cop, because it's a different shift. And that person gets kicked out of the house because that cop was just, you know, that individual was more, you know, was less tolerant of, you know, punting to the court system for, you know, for eventual justice, which right now is like four months, like for us to get an eviction, I don't get a court date for 60 days. So like Craig Fuhr (11:47) Yeah, it's a real. Well, let me just stop you there. So obviously, squatting is becoming a bigger issue, front and center issue in Georgia. There was another update from Arizona getting ready to pass a bill against squatters, as well as Texas, which comes as really no surprise when you think about the number of essentially homeless people that are flooding over those borders right now, looking for a place to stay. One of the things, Jack, you walked into my office. a few weeks ago, maybe a couple weeks ago, and you're like, you want to blow your lid about something? Which is always one of my favorite things. And you were talking about a new eviction update here in Baltimore, which frankly, look, if one state passes it or one locale passes it, you can rest assured that other legislatures are thinking about it. So it doesn't matter where you're listening, who is from right now. Jack BeVier (12:25) Hehehe Craig Fuhr (12:48) This is an update that I think you should know, Jack. And you mentioned that now, so go ahead and tell us what, was it Baltimore or the whole state, Jack, that was considering this? Jack BeVier (12:56) Whole state of Maryland, yeah, which is why it's concerning for listeners wherever you are because yeah, as you mentioned, like, you know, as soon as one state sets the precedent, other similarly colored states like to follow suit and use that as, hey, this isn't a crazy idea. Look, they've already done it here. And so Maryland, unfortunately, paved the road for a new legislation where they introduced an additional surcharge for a failure to pay rent action, which is what we call rent court. And so it's a, it's an additional surcharge of the number $48. I think it's yeah. Uh, and it's non-recover. The issue is, uh, well, that surcharge is paid by the landlord and it is non-recoverable to the tenant. Except through the security deposit, which basically means non-recoverable, right? Cause like Craig Fuhr (13:28) I thought you mentioned it was something like 48 bucks. Yeah. So let's break it down for folks. Tenant refuses to pay or doesn't pay for one month, two months. You take them to rent court. What was it in the past, Jack? You had to pay a fee for the rent court. $8 to file a claim in rent court. And so you didn't care whether the $8 was recoverable or not. You would get your day in court, get it adjudicated. But now you're saying that it's a $48 fee. Jack BeVier (13:54) Mm-hmm. $8. Yeah $8. So went from $8 to $48. Yeah. No, no, in addition. So it's still eight, but now it's an additional 48. Now that and that $8 was recoverable to the tenant, you could put it on their ledger. And when they gave you money, you could say, hey, you know, part of that money went to pay in that court cost. Now there's an a supplemental $48 surcharge, which is not recoverable to the tenant. So one, it's really annoying from a bookkeeping point of view, right? Because you have to like track what stuff is recoverable versus non recoverable. And Craig Fuhr (14:26) I see. Yeah. Jack BeVier (14:40) the, and so as a result, you know, it's a, it's a $48 tax on the landlord for using the court system as a collections mechanism. Right. And so for those folks who are habitual late payers, that fee is essentially a decrease in rent, right? Like you're, you're just taking four 50 bucks less, you're getting 50 bucks less in rent. Cause you have to pay 50 bucks every time you want to take someone to rent court. And so I think landlords are going to be a lot less tolerant of late payers. In Maryland, we've got this feature in the law where it's called a no right of redemption where after four times, if someone pays late within a 12-month period four times or more, on the fifth time, you can say, hey, they can pay or not, but they're gone. They don't get to pay to stay after the fourth time. I think ironically, that's what's going to end up happening is that landlords are going to use that. Craig Fuhr (15:23) Mm-hmm. Jack BeVier (15:37) feature of the law on a more regular basis. And I think that, you know, this is, in my opinion, this is one of those like, well intentioned, but like don't understand, but like, legislators, or, you know, politicians who don't understand the economic down, like, you know, trickle down effects of things, they're hurting the people they're intending to protect. So in the past, like, for example, so in the past, we, tenants could pay rent late, and landlords, the custom was to, you know, you take them to rent court and you get your judgment, but they eventually pay. And you have people who are, you know, habitually in rent court. And it takes four months to get an eviction date. And so from the tenants' perspective, just use easy math here, say the rent's $1,000. From the tenants' perspective, they can borrow that $1,000 for four months, and it costs them a 5% late fee plus $8. And so, you know, it's cheaper than a payday loan, right? It's like a credit card. You know, the landlord's providing the tenant a four month credit card, a $4,000 credit card for, you know, for $8 plus 5%. So it's, you know, it's an expensive credit card, but hey, credit cards are expensive. And with this change in the law, landlords are now not going to be willing to do that. They're not gonna be willing to extend credit because it costs them 50 bucks to extend credit. And so, Craig Fuhr (16:34) Oh yeah? have any idea what sort of the national average is for late pay? Because no, I mean, well, like, the reason why I ask is, you know, Dominion owns over 800 properties. So I don't know what percentage of those each month is late. However, if I got to pay 48 bucks per property to take a tenant into court, it has to add up. Jack BeVier (17:04) I don't know. That's a good question. Oh yeah, that's gonna add up. That's gonna be a lot of money. Yeah, we're not gonna tolerate that. It's just not gonna happen. So now we're gonna be using no right of redemption on a much more regular basis. And I think ironically, the more professional landlords are going to enforce the letter of the law with a much higher level of frequency. And so there will be a period of sorting out getting rid of the late payers out of the more professional landlords' portfolios. And ironically, like the less professional landlord will be the one who's already doing a worse job on average of tenant screening is going to be the one inheriting all these late payers. And so I think there's going to be a bifurcation in the market between professional landlords who have tenants who pay on time and you know, unprofessional landlords who don't really, who don't really know what they're doing, who get the late payers and you'll have more. So you'll have a less professional experience, a less professional management experience, and you'll have the late paying tenants there. Those will probably, folks will also probably gravitate from a geographical point of view, right? In the nicer locations, you'll have the professional tenants with the good paying tenants, sorry, professional landlords with the good paying tenants. And in the lower end locations, you'll get worse housing outcomes and lower end tenants. So it's I think it kind of exacerbates the bifurcation in the market. And as a result, it's kind of, you know, ends up being from an investment point of view, you know, careful because the good, you know, good paying tenants are going to be gravitating towards better areas and more quality landlords. So like going into the lower end of the market, I think becomes even riskier a couple of years down the road here. Obviously this stuff takes time to play out. Craig Fuhr (19:04) Sure. Well, folks, if you're listening and you're a landlord, just a quick hit update on sort of what's going on around the country, legislative-wise, in terms of squatters and evictions. Screen your tenants and visit your homes often if you can. That's the quick hit for today from Real Investor Radio. Thanks for listening.