Chad Duval: Hey guys, this is episode number seven of the Start FM Podcast. Today we’ll be covering the top five tenant-friendly states and why you absolutely need to avoid them. Also, sympathizing with your tenants and why it’s a really bad idea and also a strategy that could possibly save you thousands of dollars in eviction costs.
Speaker 2: This is Start FM. Now, here’s your host, active real estate investor and entrepreneur, Chad Duval.
Chad Duval: Hey, what’s going on guys. Today is a solo show. You only get me today because we are seven episodes into the show and I am realizing now that I’ve never actually formally introduced myself to you guys.
I appreciate you guys listening along. I know you guys picked up a bunch of pieces here and there in the interviews of my experiences and kind of who I am, but I figured I’d take this episode today to give a little bit of background about the podcast, give a little background about me, and then dive into a few tips that could potentially help you guys with some evictions if you are new to real estate.
Yeah, I live in Boston. I live in downtown Boston, in the Seaport area with my girlfriend and his small little shoe box apartment. I was born not too far from here in rural New Hampshire in a small town called Gilford, middle-class family, just your typical upbringing in rural New Hampshire except for that, my parents both of them actually own their own businesses and along with that comes a lot of instilled work ethic.
As a kid, I was always working. I was not allowed to have fun per se I guess, played sports, did my school work, wasn’t that good at school, but yeah, at a young age, my parents really made us work hard and a lot of that was driven by money too because we never actually got paid for a lot of stuff unless, we actually did something for that money.
We we were never paid for chores, but if we wanted a new snowboard or better shoes than our parents were giving us, my parents would employ us and we would actually go to the job sites in and do that sort of thing. My dad owns a painting business and mom owned a cleaning business.
Actually, both still own those businesses today. Fast-forward some years, I went to high school, graduated, went to college. I’m still part of that generation where your parents really believe you had to go to college.
Shoved us into college, shoved me and my siblings. I am the oldest of four of us. I have two sisters and a brother. But yeah, I went to a small college up in Northern New Hampshire. Plymouth State University, didn’t do much other than snowboard and I guess it was a lot of drinking and partying and screwing around the whole time. I passed barely.
I think my GPA was something like a 2.4 I think when I graduated. I just did enough to get past, didn’t like the schoolwork part of things, but I did enjoy the best that I could. Graduated in ’08 and as everybody knows, even if you weren’t in real estate, ’08 eight was probably the worst year to actually graduate college being that the whole economic economy collapsed.
When I graduated, I had a really hard time finding a job and the only job that I could get right after school was through my uncle, who was a banker. He was a president of a bank and ended up hiring me under him to do a sales job selling mortgages.
Again, this is ’08 when banks were not lending mortgages and everything was crumbling. I think I actually was just ending my training and I showed up to work one day and the doors were locked.
There was a note on this glass door. I actually pulled up and there was like one of the employees there, a woman was crying and everything like that. I look the at the note and everyone’s like, “We don’t have a job anymore.”
They closed down the branch, basically terminated all of our employment and I was out of a job. After that, I kind of floundered around. I went back and worked with for my dad a little bit and didn’t know what I was going to do.
Back in college, I actually did an internship or a study abroad program, but it was actually within the US and I did a semester out at Cal State and fell in love with California and at this time I was like, “You know what? I’ve always wanted to live in California. I don’t have a job right now. I don’t know what I’m doing, so let’s pack up and move to California.”
That’s what I did. This was ’08, no job, moved out there and struggled really bad. Really, really bad. I mean, I didn’t have a job for a couple of months. My parents flew me back and forth from Boston back and forth to work with them for a couple of weeks and flying me back, have enough money, keep looking for jobs, that sort of thing.
That went on for a couple of months. Also worked at a few other odd jobs. I think I worked overnight folding clothes at Kohl’s. I worked a little bit at a Sherwin-Williams stocking the shelves with paint and selling paint.
Yeah, I kind of floundered around for a little bit there until I finally found my first job in aerospace which is actually what I still do today for my 9:00 to 5:00 and it was actually through a friend of my parents who got me an interview at this aviation company and I got the job and worked there for a few years and I think this was about 2013, 2012, decided to look for other opportunities, got a job offer in Miami for another aerospace company.
More money, more responsibility. Thought it was a great idea until I got off the airplane, actually accepted the job without seeing the facility and the second I pulled in, there were cameras everywhere. Even my new office had a camera in it and the owner of the business would sit in Switzerland and watch all of his employees and the cameras moved and if he didn’t like what you were doing, he would call you and ask you what you were doing and instruct you to do otherwise.
That was day one of this new job and I decided to from that day look for another job and after six months, I got another job with the company that I had left in California. They had a division in Connecticut and they were looking for my help to help them integrate a new product line that I had a lot of experience with.
I took that job in Connecticut and that’s when my whole real estate career began. This was 2014, moved to Connecticut, started working for these guys and thought it was going to be a long-term job and so I started looking for a house.
My parents at the time were kind of like asking me, “When are you going to buy a house? When are you going to settle down?” All this stuff. It got me thinking and I ended up buying a property in Connecticut, got the loan through the same uncle that hired me previously a couple of years back at that bank.
He was working at another bank at that time now and got me pre-approved, bought a single-family home and through that process, I actually … My parents had mentioned too that, “Why don’t you look for like a duplex and you can live in one side, rent out the other?” The modern day house hack.
I don’t even think it was a thing back then, but so basically I found a house, had a full walkout basement and I had my dad and myself on weekends going to town on the basement and converting that into an accessory unit. It was partially finished, but so we had to put it in a small little kitchenette and a bathroom and some carpet and stuff like that.
It wasn’t a huge job, but it took us about six months and then I moved into the basement, lived in there for almost a year and rented out the upstairs through that year as well and basically was living rent free, mortgage-free and the only thing I had to come up with was the utility payments.
At that point, I was completely hooked. I mean, that first paycheck that I got for my tenants, it was the weirdest thing. I had never received a paycheck from a stranger before for something that I owned other than things that I was selling.
It was, I don’t know, it was really cool. I got into it, I fucked up a ton, ended up getting robbed by this tenant at one point. Didn’t know how leases worked. My lease sucked. There’s a lot of loopholes in it that they used to leave early and had to find new tenants and I don’t know, I stumbled my way through it, but at the end of the day, I was still hooked in the sense that I could buy a property and have somebody pay me for it and live rent-free.
But at the same time, I did this for about a year and I met a girl and moved to Boston and this was a nice little tip that I found out through this process that you do not have to live any owner occupied property more than a year.
At that point, I had lived there for a year. I felt confident that I could leave and then rent everything out and move to Boston where I am now and since then, I have purchased a nine unit apartment building in New Hampshire.
Also recently in April, I purchased a 15-unit in New Hampshire, not too far from that nine unit. All in all, I have 26 units. I’ve been in real estate for about six years and I’m loving it. I’m absolutely loving it. I’ve been trying to get this podcast going for the last four years I think it’s been until finally I bought this 15 unit and I finally felt like I had enough confidence to actually talk about real estate and actually bring some value to you guys.
Super excited to get this thing going. The show we’ll actually be publishing every Thursday. I guess I’ve never really established that with all you guys. The main focus of this as you know so far, if you’ve listened to this point, is to try and help people get off the sidelines.
That’s why I called it start. I can’t stop talking about real estate because I see the value in it so much and I want to just help as many people as I can start in real estate and I think there’s a lot of other podcasts out there that talk a lot and macro stuff and don’t really get into the nitty-gritty and I’m trying to do my best to hone in on the first deals of all of the interviewees that I bring in and really try to unpack that and see if there’s any kind of strategies that we can work on together to kind of bring more people into this world.
Officially welcome to Start FM and I’m super excited to talk to you guys about these three topics surrounding evictions. The first thing is trying to invest in a landlord-friendly state.
Of course, from an example like when I bought my Connecticut property, I bought it because I was living there. I didn’t even think of if it was a landlord-friendly state or a tenant-friendly state. I just, I got into a real estate deal and I totally advocate for that, for everybody.
I value getting into the game well above dealing in with a landlord-friendly state and trying to attain that, but it is something that you need to be aware of and for me, when I first started in Connecticut, it was the furthest thing from my mind.
I was struggling to get the property, struggling to figure out how to rent to a tenant, how to manage a tenant, all that stuff. Evictions were so far away because it was like an afterthought until recently, six years later I had to go through an eviction with that property, but some of the top landlord-friendly states were like Texas, Indiana, Florida, Arkansas, Colorado and then also some of the tenant-friendly States are like California, New York, Hawaii, New Jersey and Vermont is one of the worst too.
The reason is like back in the day when the US was being developed, if you split the states like basically the Southern versus Northern, I mean this is not a hard fast rule, but it’s a good way to think about it.
Southern states when the US was like first being developed, everything in the south had to do with agriculture. If everything has to do with agriculture, legislation is going to come in and protect landlords to protect their land and that’s the most important thing that they value at that time.
But then you take the Northern States back in the day, it was all focused on manufacturing and trade and it was a total constant immigration from Europe which as you have more immigration from Europe, the cities grow and get crowded and then legislation comes in to help protect those immigrants.
It’s not a hard and fast rule like I said, but if you can think it in those terms, the North a lot more renter-friendly, and then anything in the South is more landlord-friendly which then brings me to my second topic, which is sympathizing with your tenants.
Have you ever heard of that saying, “If you give an inch, they’ll take a mile?” Well, I know in my experience with all the tenants that I have had over the past, this statement is so true and it’s also so hard to not give that inch because we’re all humans, we want to help our tenants.
We want to be … I made the mistake at the beginning is trying to be friends with your tenants. Now, I absolutely do not be friends with my tenants, but it’s very, very, very hard and I can’t emphasize it enough because I’ve been burned so many times.
Right now, going back to that Connecticut property, I rented to this couple that had some kids, they were boyfriend, girlfriend. They had lived in the property for two years, no issues, awesome tenants, took care of the property, and then late payment started.
They’d start paying the late fee and it would start getting late every month and then progressively later and later and then I’d have to start reminding them, “Hey, if you’re over 14 days, then you actually have to … We have to start the eviction process and all that stuff.”
It worked with them and it was very open with them and they were really receptive to it and were very open to communication which was great and I thought, “Oh, this is awesome. We’re working together on this, yeah, they’re a little bit late here and there, but we can work through this.”
That dragged on for almost six months to the point where they ended up getting 30 days late and then I can’t remember what I did. I think after 30 days I told them, “If this happens again, we’re going to start the eviction process. No questions asked. There’s no negotiating.” All that stuff.
It ended up spiraling out of control, and I’ve heard every excuse under the book, “Oh, my car died this month. This person died.” Every month there was a different excuse and that’s a pretty much a tell to death the tenant is on its way out.
We went through this process and so it’s six months of really late payments and paying late fees and then finally they didn’t pay. At that point, we were already 30 days late and then we had to start the eviction process.
We’re already a month behind and then you add three to four months on top of that, you’re talking five months of no payments of rent and then these tenants turned into bad tenants because I started the eviction process and trashed the place, left couches, left furniture everywhere, holes in walls.
I did post a little bit of this on Instagram recently, but you sympathize with them and you try to help them and then they totally take advantage of it. It’s something that I cannot reiterate anymore. It is super important and it’s so funny too back when I first started with this Connecticut property, I was hanging around a very seasoned real estate investor that had been doing it for about 40 years.
I’d see him here and there and anytime he interacted or anytime I saw him interact with his tenants, he was really cold and I kept thinking, “Why are you being such an asshole man? They’re trying their hardest, have a little sympathy for them.”
Looking back on it now I realize that he was just looking out for the … He’s looking out for himself and looking out for the business and putting the business above their tenants, which I think ultimately it comes down to because in my example of this tenant that I had in Connecticut, they totally put their priorities and put themselves above me and my business.
It’s something to definitely keep in mind when you are managing tenants and going through an eviction process is to not allow them to take advantage of you or even before the eviction process because it can sometimes as in this example, you can spiral out of control and they will take that mile.
Yeah, and then the last topic that I wanted to cover real quick, it’s a strategy. You might have heard of it. I wish I have used it. I can’t say that I have. I’ve definitely left my ego. I haven’t left my ego at the door sometimes and gone through evictions just out of spite and almost out of revenge, but the strategy is cash for keys.
It’s basically when you offer a check or a payment to the tenant for them to leave the property. It comes in all different shapes and sizes. I mean, you can definitely … I’ve heard of people just saying, “Hey, if you leave within a week or two, leave the property in good shape, we won’t come after you for all the back rent.” Or there’s all kinds of ways that you can negotiate this, but $500 is significantly cheaper than all the loss rent and all of the legal fees.
I think this eviction that we just finished up in Connecticut, it’s going to ultimately cost me about nine and a half … Yeah, about $9,000 between legal fees, cost to get all of their junk removed, fees to the Marshal, fees to my attorney and these tenants actually left so much stuff behind that in the state of Connecticut, you actually can’t throw this stuff out when they leave, you actually have to pay to store it in a storage facility for 14 days so that costs me about 450 bucks just to do that and it’s all crap that they don’t even want.
There’s so many more benefits to doing the cash for keys route and I definitely am going to do that going forward because it’s just not worth it. Even even if you are super emotional about it and really feel hurt and pissed off that they’re actually taking advantage of you, you’ve got to be the bigger person.
At least I’m realizing that because I’ve never been the bigger person when it comes to this and why I have actually hired a full-time property management company to manage the rest of the properties because I know that I have a hard time pulling my emotion out of the property and everything that I’ve done for them.
Cash for keys, it works. I’ve heard of many people using it and of course, it might not work if you have a really rogue tenant, it might not work, but it might be a very good strategy to have in your back pocket if you get into the situation.
To sum up, number one was to make sure you invest in a landlord-friendly state if possible. Always invest in real estate even if it’s not in a landlord-friendly state just to get in the deal and just getting in the game, but try to make sure that you can invest in a landlord-friendly state, it will pay dividends later in your investing career and number two was harden the hell up and do not sympathize with your tenants.
Number three again is the cash for keys strategy. It is a game changer, game changer. So guys, I really hope you guys enjoyed this episode. I know it’s a little different and actually, I’m looking for a little bit feedback. If you guys like the solo style episodes, I might try and do a few of these here and there to kind of bring some more value to you guys.
Hit me up over on Instagram @iamchadduval and let me know what you think. I’m always looking for feedback and ways to improve the show and also, I want to shout out to 30 Banana Guy over on iTunes for leaving an awesome review.
If you guys haven’t left a review, please do. It helps out the show and also, please subscribe. That also helps the show and it helps our ratings, our rankings. We do have a super awesome lineup coming up in the next couple of weeks with people that I never thought I’d have a chance to actually talk to.
This is going to be good and any help that you guys can bring to the show by doing these reviews and ratings and subscriptions, it will continue to grow and bring more value to you guys.
With that being said, let’s get out of here and always remember that you don’t have to be great to start, but you have to start to be great. See you.