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Rent Control and No More Criminal Background Checks: New Laws For Real Estate Investors 2020 - YouTube
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all right let's talk about this there
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are some new laws coming for real estate
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investors and it's some scary stuff
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folks they are sending shockwaves
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through the investing world as we speak
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we're going to get to all of those new
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laws in a moment or actually a handful
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of them because there's way more than I
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can even talk about but if you're new
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here welcome this channel is devoted to
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helping you make money and building
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financial intelligence you're gonna
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learn things on my channel that'll set
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you apart from everyone else I hope and
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you'll learn things that we were never
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taught in school never taught in high
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school so please subscribe and drop me a
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comment to let me know that you are new
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here say hey I'm new here
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please let me know I try to respond to
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every comment that I can ok let's talk
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about these scary new laws and I'm gonna
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give you three choices as to which state
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is starting this trend of hurting
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landlords more and more can you guys
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guess which state it is can you three
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choices if your answered California then
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you're absolutely right and once again
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it's a room it's a reminder as to why I
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would never invest there so what in the
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world is going on in the Golden State
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well how about this listen to this you
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can't do a criminal background check on
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a tenant you must rent out your property
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or pay a fine you must report all of
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your company's beneficial owners boom
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boom and boom this is a lightning bolt
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right shooting through the world of
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investing and this is bad stuff folks do
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these sound like an authoritarian
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bureaucracy this is the stuff you'd
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expect from Russia
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or Cuba not the United States California
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at this point probably should just
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secede from the union already this is a
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disgrace this is a huge restriction on
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property and privacy rights folks this
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is really really scary so in California
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the Oakland City Council outlawed
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criminal background checks on
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prospective tenants now the purpose they
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said is to allow the formerly
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incarcerated to compete for housing and
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avoid being homeless
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ok I get it now my great attorney friend
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Garrett Sutton broke it down like this
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and I love the way that he puts this and
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he hates California by the way he said
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that any housing provider at any person
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aiding a housing provider ie a man
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company will face stiff penalties for
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doing a criminal background check
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liability can be three times the greater
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of a one month's rent or be actual
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damages including damages for mental or
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emotional distress a court may actually
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award punitive damages and attorneys
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fees criminal penalties may also be
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asserted against the landlord so tenants
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rights attorneys could make hay with
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this ordinance going after landlords
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like crazy so let me get this straight
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if I run a company and I'm hiring I can
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do a criminal background check to make
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sure that the person I'm hiring doesn't
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have a criminal history but if I want to
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rent out my property to you I can't do
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this anymore this is a total catch-22
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which I'll explain more of in a moment
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and Gareth Sutton goes on a little
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further to explain that if you own a
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rental property in Oakland you most
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certainly want it titled in the name of
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an LLC which would under normal
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circumstances shield you from personal
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liability and rather than screening
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tenants personally for which these new
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crazy high penalties would apply you'll
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want to use an independent management
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company for that task make sure they're
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doing it not you because if there's a
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accidental criminal background check on
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a prospective Oakland tenant the
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management company's going to suffer the
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consequences not you it's crazy right
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but that doesn't sound like a great plan
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either because now the management
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company is liable look landlords have a
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duty to protect the neighborhood of the
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rental property from the criminal acts
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of their tenants landlords are routinely
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held responsible for their tenants
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dealing drugs on the property or having
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an illegal dog that bites somebody or
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just name a crime and we as landlords
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are responsible other tenants or anyone
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in the neighborhood can sue the landlord
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can sue me for the rental property being
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a public nuisance that threatens Public
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Safety if you've been following our
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journey on one of our new jersey
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properties you know the story so in
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Oakland you have to rent to criminals
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but you're still responsible if they
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engage in the crime so if one of your
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investing guidelines is to avoid
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nonsensical catch-22s you may want to
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just sell your Oakland properties and
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never in
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stare again please note that that's not
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the only place either San Francisco is
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also considering legislation to ban
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criminal background checks what so I
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would run not walk away from California
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because it's gonna happen statewide
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here's something else would be coming to
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other big cities in blue states San
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Francisco voters just approved two
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measures affecting real estate rights
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the first one aims to deal with the
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blight of empty storefronts and no one
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likes empty storefronts right at empty
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buildings but the owners of these retail
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spaces remaining vacant for six months
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or more are going to now have to pay a
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tax of $250 per foot of linear frontage
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to the street and they giving up to a
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thousand dollars in later years and New
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York City is considering considering a
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similar tax now supporters say that
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landlords care more about the
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neighborhoods and they only want more
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rent that they don't care about the
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neighborhood of course leaving a
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storefront vacant for years does not
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actually constitute more rent no one
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wants that
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opponents argue the measure ignores
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current realities San Francisco's
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permitting process for tenant
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improvements and alterations as well as
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new business approvals they're
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notoriously old school and it can take a
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year or more to get your paperwork
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through bank financing requirements for
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expensive neighborhood retail spaces you
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have to they're called the feature
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covenants calling for only the most
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creditworthy tenants it limits the pool
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of prospective users and the rise of
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e-commerce has certainly not benefited
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anyone on these brick-and-mortar spaces
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throughout San Francisco everyone's
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buying stuff online and the unintended
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consequences of this new ordinance in
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San Francisco will be interesting to
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watch from a distance because it's gonna
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hurt what about Detroit other big cities
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the state of California is also inserted
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they're very visible hand into the real
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estate market statewide rent control
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folks has arrived properties older than
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15 years are limited to annual rent
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increases of 5 percentage points plus
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inflation rate over 10 percent whichever
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is less owners cannot raise the rent
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above the new limits to cover capital
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improvements on these older buildings
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which means the Golden State just like
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Portland and parts of Oregon will now
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have all of this deferred maintenance
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the new California law also restricts
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landlords ability to evict tenants if a
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tenant has occupied a unit for at least
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12 months evictions can be for just
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causes where the tenant is at fault and
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in a limited number of cases where
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they're not at fault such as the owner
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moving in or taking over the unit of
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taking the unit off the market
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so when you're evicting any tenant a new
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landlord must now provide written notice
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and state whether it's an at fault or no
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fault issue if there's no fault on the
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tenants part the landlord must provide
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one month's rent money to cover the
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tenants relocation expenses in
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California corporate officers and
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managers can now be held personally
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liable for civil penalties resulting
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from minimum wage violations and you
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know Garretson likes to talk about
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personal liability because it always you
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know that it's very very important for
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you to be covering your personal
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liability with an LLC New York has gone
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now a big step in hurting limited
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liability companies and it could totally
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upset the balance between productive
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employment and limited liability
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protection the top ten owners of an LLC
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can now be held personally responsible
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for violating New York's wage and hour
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laws so consider like here's an example
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and we'll kind of break it down you
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invest ten thousand dollars into an LLC
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that's doing business in New York
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in exchange you get a one percent
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interest in the LLC that's normal right
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nine other investors hold the remaining
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ninety nine percent and three of them
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conduct the LLC's business operations
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you're a passive investor with no
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management or authority you like it that
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way that's the type of investor you are
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you invested into a limited liability
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company because your liability is
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limited to the ten thousand dollars that
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you invest in and nothing more right
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that's the whole historical value of an
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LLC going back hundreds of years but New
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York has now changed the rules if three
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managers don't pay for the example one
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hundred thousand and wages you're now on
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the hook for the payment even though you
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only own one percent of the LLC and had
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no management authority you're now
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jointly and
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severally liable for the money this
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means that if the other nine owners flee
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or are bankrupt you now owe the entire
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wage claim amount what if people turn in
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their shares and all of a sudden without
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your knowledge your your that one of the
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top ten owners you're responsible for
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the whole claim that can happen
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New York's law now totally up ends the
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concept of limited liability and
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attorneys are gonna be counseling
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clients to think long and hard about
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doing business in New York all this
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disruption is in the name of protecting
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workers that's what they're saying but
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what about the owners of these companies
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DC is also demanding more from limited
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liability companies their government
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with the stated virtuous goal to expose
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ban let bad landlords hiding behind an
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LLC that's literally a quote from them
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now wants ownership information on all
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LLC's whether for real estate or
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business formed in DC or doing business
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in the district just visualize this for
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a moment this is one step away from
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collection of information and plaintiffs
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attorneys are going to be suing not only
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the LLC but also the LLC's individual
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owners and in some cases the courts are
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going to dismiss any personal claims
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that would be normal when a liability
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rest with the LLC but now in many cases
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the suing of individuals will be used to
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gain leverage in litigation and again
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the limited liability protection of the
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LLC will be diminished through
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government regulation and we've already
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seen statewide rent controls on the
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books and moving in different states
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across the country we've already seen it
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in Portland Oregon and these are just
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some of the laws that are now coming and
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again this I come back to my point about
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investing in blue states versus red
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states when you have these incredible
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regulations all of this red tape it
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makes it in hospital inhospitable to do
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business in those states New York has
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spent millions of dollars on television
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commercials for build a business in New
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York it's the greatest place to build a
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business why do you think they're
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spending millions of dollars on
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television commercials to encourage you
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to do business in New York it's because
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so many people are moving out of New
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York
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to other states like Texas Tennessee
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North Carolina and Florida way more
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hospitable for business growth
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California everyone's leaving going to
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Idaho and Arizona and Texas there's all
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of this migration out of these blue
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states then all these people leave all
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these businesses leave they have to
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raise property taxes for the people that
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remain they make it more draconian every
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every year they're not gonna roll these
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things back but some states just did
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like Texas Texas went the opposite
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direction which is why I love you know
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why we do so much business in Texas and
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building our properties there so Texas
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during the the November election made it
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even better for landlords they made it
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even better for us as landlords and now
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with a statewide income tax reduction so
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the people in Texas said hey we've done
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a lot of business moving here yes we're
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paying higher in property taxes than
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maybe we're comfortable with but we're
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happy to not be paying income tax so
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huge shifts across the country in
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certain states blue states making it
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more inhospitable for business and
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landlords if you're in California with
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so many California viewers of our
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channel that asks are like well I live
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in California how can I invest and my
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point is don't invest in California and
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that's out of state and that's like what
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our company does and Morris invest we
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help I think of maybe 70% of our clients
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live in California and buy properties
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through us in in Texas and other states
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because we make it incredibly easy cash
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flowing rental property with tenants
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already in place new construction built
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from the ground up you don't have if you
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live in one of these blue states that
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are really draconian and you were
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thinking about investing or finding a
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rental property in your backyard
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please don't I've already warned you
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about New Jersey now morning you about
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New York and I've been warning you about
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California for years pay attention to
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these laws and they're gonna start
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popping up in other blue blue states
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across the country you watch Milwaukee
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I'm talking to you I'm talking to you
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Milwaukee I cannot believe I I bet you
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I'll put money on Milwaukee over the
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next few years having some
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these really draconian laws pop up you
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watch I wants to take me up on that bet
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so there you go folks some brand new
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laws that will dramatically affect us as
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real estate investors
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