Learn about Real Estate by one of the premier Real Estate Investors in New Jersey. Each week Joseph J. Zoppi will be talking about investing in real estate including buying and selling houses and apartments. Understand how the economy, the Fed and world events impact real estate and how to adjust to these dynamics.
Templar Real Estate Radio Show for May 2, 2020
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Introduction:
The following program was paid for by Templar Real Estate. The views and opinions expressed on this program are not necessarily those of the staff and management of WMTR. As always it is advisable to consult a professional before making a major decision. It’s time now for the Templar Real Estate Talk Show. Here’s your host for the program; Joseph J. Zoppi.
Joseph Zoppi:
Hello, welcome to The Templar Real Estate Talk Show. My name is Joseph J. Zoppi. I’m a real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. I’m still recording this from home. I’ve been doing that for the last month or so. I used a different mic last week to get better sound quality and it sounds like it’s a lot better so, I’m happy about that. You can reach us at templarcashforhouses.com or you could call us at 973-240-8593. That’s 973-240-8593. You can call us for any questions that you have or you could email us. Any topics you want to discuss on the show, I’ll try to fit them in.
My company is a real estate investment firm, we buy houses for cash. We purchase apartment buildings. We do joint ventures with other real estate investors. We loan money for rehabs and provide transactional funding. We also work with individuals that want to work with us and invest with us for single-family houses, as well as multi-family and apartment buildings. We are not speculators. We’re very protective of our money and our investors’ money.
I’m not a real estate agent and I do have on staff, real estate agents but we’re not a brokerage. If you need to sell the traditional way, we can do that through one of my agents as well. This show will go through everything to do with real estate and those things that impact real estate. We will talk about our rehabs, some of our investments, what went well, what did not go well, and how we’ve learned from it or how we’re addressing it. We will talk about the economy, interest rates, we’ll discuss trends in the real estate market.
Real estate is one of your biggest investments, so the more you know about it and understand what’s going on, the better it is. Again, these are only my opinions and I strongly recommend that anyone do their research and check things out. I always say whether it’s an attorney, CPA, or anybody else providing information, you should always look into it and look at it balancedly. So, you should look at all the pros and cons on both sides. Remember, when you’re looking on the internet, everybody has their own opinion when they’re writing an article, so it might be slanted one way or another way. So, please just take that into account. Just like when you see an article that’s written on a particular topic, you could probably get an understanding of where that author is leaning towards. If it’s a particular thing that they’re talking about, in favor of. So you’ve got to always look at the pros and cons of everything you look into. There’s just so much information out there. There’s a lot of wrong information, so just be careful.
The things that I’m going to provide to you for the most part are things that we have done and we’ve been successful at, and there’s things that we have not been successful at. Certain things I will do in terms of predictions or where I think the market is going. Again, those are more on the opinion basis and you have to understand, it’s my opinion. It’s just my opinion. But there’s certain things that we do that are more black and white in terms of how we’re doing things and how they should be done.
We’re also having individuals call us and we’re having private discussions with them. It’s free of charge. In terms of their house and ways to keep their house in this stressful time. There are certain bills that aren’t being paid anymore and people are asking for our advice on that. They’re also continuing to ask about buying their house, buying their house fast for cash.
Lastly, we provide training for individuals that want to invest passively in real estate and want to team up with individuals. We go through a virtual training session. Just things that you need to look out for. If you have a real estate investor that you know and you want to invest with them. So, we go over some of the points that you have to look at in terms of that and to try to mitigate any loss or impact.
So, I’m going to go over a few things today. One is Governor Murphy put an Executive Order out about security deposits, so I’m going to go over that. Insurance policies that in the event a renter does not pay their rent. How we’re addressing looking at houses with COVID-19. We’re going to go over some other things that have happened this week, doing our rehabs and how we counteract them and try to mitigate any issues we had. I’m going to talk about rental defaults. We’re going to talk about loans and tighter standards that are out there right now.
I had some interviews this week with some major publications. We’ll see if they’re going to be published. One is on predictions for this coming year in terms of where the real estate market is. A lot of times when I do interviews, they might interview one or two individuals and dependent on the slant of the article they might go with one person over another. Sometimes I get published and sometimes I don’t. It depends on what the editor wants for the article and the individual that’s being interviewed, and what they’re bringing to the table in terms of their ideas and their thoughts. So, it does vary considerably.
First thing is Governor Murphy, he put out an Executive Order which stated that right now you could use your security deposit if you’re renting. You could use your security deposit for a month’s rent if you don’t have the money. I’m waiting on this. I’m biting my tongue a little bit because I understand where it’s coming from and I’m not upset. Governor Murphy’s looking for the tenants and taking care of them. But on the flipside, he put something out and it really doesn’t protect the landlord and I’ll tell you why.
So, security deposits are not designed for the most part, to augment rent. That’s not what it’s for. The main reason for the security deposit is a lot of times, if there’s damage to the apartment. So, by using the security deposit, now as time progresses, at the end of the lease if the renter doesn’t decide to continue and there is damage, well then who’s going to eat it? It’s only going to be the owner, the landlord.
So, I’m waiting to see if there’s going to be any changes to it but I’m not particularly happy about it. I’m not having any issues with it per se, right now. But I am a little concerned and I’ve spoken to a number of people and they are concerned that just an order like that can go out, and there’s no repercussions to help the owner out. If you’re going to give it for the tenant, that’s fine. I have no problems with that. But on the flipside, what about the apartment owner? A number of people on the message boards were saying, well how about you just cancel the property tax for X amount of months? That’s rightfully so, but you don’t hear anything from any of the government officials on that, do you? But you do hear you could help the tenant out but not the apartment owner.
So, we’ll see where this goes. I’m just playing the waiting game on this before I get too upset. As I said before, things are moving very quickly. The government and government officials can’t think of all the different scenarios but I think this is one that’s pretty blatant, so I would have hoped this was a little more thought out than it was. So, I definitely do have an issue with it.
The other thing is that they said in the Executive Order, if you renew the lease then you have up to six months to repay, put back, or refund, or fund the security deposit. That’s on the renter’s side. That’s something, too. You might be going well into six months into the lease before the money’s brought back or who knows, maybe they can never afford it again. So, that is just something that has to be looked at.
The other thing is that if there’s additional problems where the person now doesn’t pay the rent the last month, what are you going to do? Evict them? You’re not going to evict them, even if in good times. It takes time to evict someone. So you could be out the damages to the apartment as well as the last month’s rent. So, we’ll have to see where this goes and hopefully it’s somehow corrected.
Another thing that’s out there and it’s been out there for a little while. I never decided to do it. Rethinking that based on the situation that occurred but there’s certain insurance policies out there that in case the renter defaults and doesn’t pay the rent, then you could be reimbursed and you could be reimbursed up to six months of lost rental income. The cost is approximately, ballpark $25 per unit. So if we think about it and we have a four unit building, that’s going to be $100 a month. Then over the course of the year it’s going to be about $1,200. That might cover one month’s rent, approximately. Somewhere around there. So, you have to decide if it’s really cost-effective or not.
Now traditionally, renters are pretty good depending on the type of neighborhood and if you vet them out really well. For the most part you shouldn’t have issues. But who knows if we’re going to have another issue like this again or if it’s going to be another five years, ten years, or whatever. So that’s something you have to think about. Anytime you do a cost/benefit analysis to determine the cost involved and is it beneficial to do it, you have to really look at all the different scenarios.
So, originally way back when I was working for an IT consultant firm. I was Director of Professional Services for the northeast. One of the things that came up is that all the individuals that worked for me, they had these Sprint phones. It was like a walkie-talkie and a cell phone all built into one. Then we switched to Verizon. We had a lot of phones. I had at the time, almost 70 individuals reporting to me and they all had business cell phones. So the question was, should we put insurance on the phone or not?
So after looking over everything, I totaled up the amount of insurance and how often we had to use insurance historically and it was determined that really, we wouldn’t use the insurance and we wouldn’t put it on, and we would just have to eat it. So, again, you’ve got to look at the different scenarios and you’ve got to look at things from a historical perspective if you have that information. So, I’d like to close out with this segment, and I’ll be back shortly. Thank you very much.
Joseph J. Zoppi:
Hi. Welcome back to the Templar Real Estate Talk Show. My name is Joseph J. Zoppi, Managing Partner of Templar Real Estate Enterprises. The next thing I would like to talk about briefly is, as I said before, about COVID-19. We’re still buying houses even though we’re not walking inside the house. We’re putting them under contract. Depending on the situation we might have to go on site but we’re very careful about how that’s done and to make sure that everyone is safe. Not only my staff, but also the people on the house that’s being looked at.
So, that is being looked at. What we’ll do is we’ll normally do a phone call first. Then we’ll do some type of video conferencing if it’s available. Like, either Facetime on the phone or some type of Zoom call on a tablet or laptop, just to do a virtual tour of the property. Then we’ll decide on a price. We’ll talk to the homeowner in terms of what we’d like to offer. Then if they’re satisfied with it, we would put something together. In terms of contract, my attorney would send it out and then it would be signed and nobody would have to go any office, legal office, the attorney’s office, or title company. That could all be done remotely.
Then upon closing, the funds would be wired to the seller. I always recommend doing that. Anytime you sell a house, have them wired. The one biggest thing is to ensure that when they’re getting wired, the wiring instructions on where it’s going to. I’ve brought up previously and I’ll bring it up again, is that you have to really watch when you are wiring funds that they’re being wired to the right place because I’ve had before where individuals have hacked into emails and provided fake information from wiring instructions, and had funds wired to offshore accounts, or accounts within the United States and then they’re transferred immediately to offshore accounts. So, that’s something that you have to really, really watch out for. To this day, it worries me every time. We’re having a settlement and we’re getting paid for a house. So, I’m always worried about that. I just, I am. You have to be hypervigilant with things like that.
So, let’s go over a couple things we had this week. Some good things, some bad things, and what we’re doing about them. Everybody loves to say I want to do rehab of houses, I want to invest in real estate. They always think everything is glamorous but there’s always lots of issues. No matter how tight and well-run an organization is, there’s always things that go sideways. No one’s perfect in your own organization and also definitely outside your organization.
So, one time I was sitting at a bar. I had a business trip and it was late at night. I was having dinner at the bar and I was talking to this individual. He was importing I think, golf balls from China. He was complaining about quality control. One of the things that he talked about is they didn’t understand over in China that everything had to be the same consistency. He said, the colors and the boxes needed to be the same, had to be exactly the same color. It can’t be off a shade or so on and so forth.
I was talking to him originally. I said, what’s your biggest problem? He explained that as his biggest problem. I said, that’s not your problem. It turns out it’s just people and that’s the biggest challenge with any business. It’s not technology. It’s not anything else. It just has to do with people. You have to work with them in terms of any issues and challenges. They might have a bad day, so they’re not giving you their best. There’s always that challenge. As a good leader, you always need to work with that and think about that in terms of what they’re going through and how it can be impacting you.
So, right now, I spoke last week about an inspection or we’re waiting on some inspections and one of them is a plumbing inspection. There had to be some changes to the plumbing because the inspection failed, and that was called a rough inspection. The first inspection. Certain things were not on the permit, so we had to make a change of the permit and we had to add some additional things. This is what the plumber did.
This is the first time I’m using this plumber. One of my plumbers retired. I have some other plumbers but I needed to bring another one on, another contractor. I’ve heard some good things about this individual and I was like, great. He seemed very, very competent. We paid him in terms of what we had to pay him, on a timely manner. He worked on the site, did a number of things and then he had to do a follow-up because we failed for a few things. Not a big deal and that’s fine.
We asked for a change of permit, or the township did and I said, please just submit it. He said he did. I’m waiting a week because I wanted to reschedule. I’m involved in this one. Usually I have my staff do it, my project manager, but this one I wanted to oversee a little bit closer. So, I called up the township. They said they never received a change of permit so they couldn’t schedule anything until they received it.
Like I said last week, I got upset because they couldn’t be more flexible in terms of me faxing the permit in. It had to be a hard copy, had to be the original, it had to be stamped, so on and so forth. So I waited one week. I’m waiting this week and getting kind of crazy now because two weeks went by and it’s going to be another week before I could get the inspections and so on and so forth, arranged. So, it’s going to be pushing on three weeks where I cannot do anything at the site. I’m paying money for carrying costs, rent, property tax, so on and so forth.
I spoke to the plumber a couple times. I said, I need that permit. He kept saying, okay. I said, just tell me where and we’ll pick it up. I’ll have one of my staff do it or I’ll do it, I don’t care. I said, I don’t care the time or anything. Wherever you’re at, I will pick it up or my staff will pick it up. Okay, okay, okay, okay. Then a number of days had gone by and each time he says, I’m going to call you, going to call you, going to call you, and he doesn’t call me.
So the last go-around, I basically dropped him a text and said, I’m going to basically have to contact my attorney and it’ll be in his hands from there on. So, now I get a quick callback. That one day he wasn’t calling me back or he wasn’t even texting me. So he said, Joe, there’s an emergency, a hospital situation. So, is it true or not? I don’t know. In the back of my mind I was waiting for him to say it was some type of emergency. Well, he said that. So, I apologized. I said, I’m sorry to hear that and that was it.
So, I waited another day and basically I told him, I’m going to have one of my other plumbers take over the job. I said, we’ll figure out the refunds later. This was through a text, so it’s all documented. Then he texts me back immediately then and says, why are you taking this job from me? I’m ready to laugh saying, I’ve been begging to get the permit for the last two weeks from you and now you’re saying something like this. So, he says he’s going to jump on it but I’m going to keep the pressure on. There’s two ways of approaching it. One is through the attorney or one through Consumer Affairs. Either way, I’ll get the results.
But what’s really funny is that traditionally, a contractor will not do the work. The issue isn’t so much the permit. Sometimes it is but he did all the work and we’re ready for it to be tested by the inspector. The issue is I just need the paperwork. So, it usually doesn’t happen that way. No matter how much you vet these contractors out, you can always have issues. We’re very, very good at that but again, we’re dealing with people, as I said. I think he maybe had too much work but on the flipside, I paid him. I was very, very patient and I was being very flexible because we would have met him anywhere. So, this is something that sometimes you have to deal with and that’s why it’s difficult for individuals that do rehabs on their houses, or jump into the real estate game and do full rehabs. The complexities and the challenges with contractors.
The next thing is that one of our rentals, we brought on a person. She came in and rented one of our apartments a few months ago. Really nice woman. She was having some problems with one of the next-door neighbors and this tenant has been just a pain in the neck. I might have told other stories about it where they chased one tenant out. Basically, they got frustrated with all the stuff they were doing, like, throwing eggs at cars, so on and so forth.
So now this woman is having some challenges. So, we’re working through it. There’s a lot of complexities with tenant laws. In New Jersey they’re very, very leaning towards the tenant, so it’s very difficult and it’s really more geared against the landlord but even when it’s tenant to tenant it’s very difficult. So, we had that complexity and I felt bad for her. But on top of it, is then she calls me up and says that her husband was in the army for a while and then he came back, and he basically just walked out on her. She lost her job and he couldn’t find a job so of course, what’s he do? He walks out on her. So, she’s upset. She doesn’t know what to do. She says, well Joe, I’d like to use my security deposit for next month’s rent. I said, okay let’s hold off on that.
We as an organization look at things on a case by case basis. We know she’s very, very diligent about paying and also making sure everything’s right. That’s just the type of person she is. She’s really a nice person. Young to mid-twenties. She has a cute kid and it’s a really, really nice family. But unfortunately, the husband ran out on her. So, she’s upset. She says, well I can’t pay now. I don’t have a job and he was going to give some of the money. So, we’re going to work with her to make sure she has a place to stay.
Even though I can evict her now because of the situation, and even if I was, which I wouldn’t, I’m going to lose rent anyway. So, we’re going to work with her. She says she might have a cousin start living with her. We’re still making money at the property and even if we weren’t, it’s not a loss to have one of the rents not being paid. We always have lots of reserves. It’s the right thing to do and that’s just the way we are. We do it on a case by case basis but you have to look at it that way. You’re dealing with people. You’re not dealing with just money and dollar signs coming through. I think that’s what really separates us from other companies. Now what we might do with her is maybe we’ll hire her part-time and then she can get some additional skills even. So, we’re talking about different things that we can do internally to help her out and maybe get her back on her feet.
So, there’s a lot of other things I’d love to talk about but time is short. So, I’d like to just thank you very much. God bless and I’ll talk to you next week. Bye.
This is Joseph J. Zoppi, Managing Partner for Templar Real Estate Enterprise and Templarcashforhouses.com. I felt this is important so I’m recording this message from my home to all listeners. In this time of uncertainly and anxiety, my staff and I are here to help. We’re here to provide private phone consultations free of charge. The first is for those individuals that feel they might eventually lose their house and need some advice on how to possibly save it. Second, as always, we are here for those that need to sell their house fast and need cash immediately. The last, if you steady or deferred income and you are looking for an alternative to the stock market, we can show you how to partner with us even in these uncertain times. You can reach at 973-240-8593, That’s 973-240-8593 or sign up templarcanhelp.com. That is T-E-M-P-L-A-R can help.com. Thank you very much.
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