matts

I don't think you are a bad guy for brainstorming your recourse as a landlord. But i think, unfortunately, your last sentence is correct. You are just screwed as a landlord here. Which is why i bring it up as a concern. As someone mentioned, the one thing that DOES scare tenants is a hit to their credit score, IF you rent to the kind of person who has a score and cares about it. From a little bit of googling, if internet access in specifically mentioned in the lease agreement then it can indeed fall under "utilities" and therefore be included under the shadow eviction clauses of most city/state bylaws. It's not black and white however.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord? Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay? It's one thing to not be able to pay, it's another thing to choose to not pay. So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent? I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis. As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent? Obviously case by case basis here and we're generalizing, so it's prob not great to extrapolate. However, if the reason why renters aren't paying is b/c they think the courts will be stuck with too many cases, then it goes for landlords too. ANd in terms of liabilities - outside of physical harm (so heat being one of the "Essential" items), what could be claimed? No legal expert here but can someone really claim that they are entitled to free rent? Again, I'm not suggesting that this is just a legal issue. If I were a landlord and I have tenants who I know are employed, able to pay, and won't even have a conversation about rent and is telling me to go pound sand to take advantage of a pandemic, then I have no problem letting him or her know that electricity is not a "right." In terms of internet / cable - depends on the building. Many large buildings include it as a part of the rent / HOA. It's just easier to negotiate on behalf of 100 units and get economies of scale and service. All due respect, I think you are just thinking about this incorrectly and i doubt you have ever been a landlord. There is absolutely a double standard. No one thinks tenants are entitled to free rent. But the government has mandated that you can't evict them. So no, you can't cut off their electricity because that is how they would boil water, see in the dark etc. That's not part of your recourse. Your recourse is eviction and it is the government that has taken that recourse away from you. You cut off their electricity, and the only thing you will get is a giant lawsuit for "pain and suffering" once the courts get back to work. Whether electricity is a right is not up to you to determine. In Ontario https://stepstojustice.ca/questions/housing-law/can-my-landlord-cut-my-electricity-or-other-utilities In california (i suspect the rules are very similar in all other states) https://homeguides.sfgate.com/illegal-landlord-shut-off-electricity-61431.html "Electricity is an essential service to make a rental unit habitable. Turning off the electricity as punishment for non-payment of rent or in retaliation for filing a complaint is tantamount to constructive eviction. Constructive eviction occurs when the landlord makes the residence uninhabitable in an effort to remove you from the property. Legal eviction requires the landlord jump through specific legal hoops to get you out. Constructive eviction bypasses these requirements by forcing you to find new accommodations. Every state provides its own legal recourse for tenants who are aggrieved by the landlord. California Civil Code 789.3 makes it illegal for the landlord to shut off the electricity to force a tenant out of the property. You may sue your landlord in civil court for actual damages, attorneys fees and other damages if he does so. The statute allows an amount up to $100 per day for each day the electricity was turned off ." The next point is I'm not suggesting anyone is stupid enough to tell their landlord "I can pay, but I just won't." They will tell you their hours were reduced, their aunt has the virus and she needs help etc. And you can't ask them for financials to prove anything like you can with a commercial tenant. They don't need to provide proof of anything. If they don't pay, your recourse is to go through the courts. You can't change the tenant-landlord bylaws just because the courts are closed.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord? Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay? It's one thing to not be able to pay, it's another thing to choose to not pay. So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent? I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis. As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent?

Agreed. By May 1, everyone will know whether their job is steady, or they will have some cash from the feds in their accounts. I'm still a bit worried many will not pay even if they could. You see that already in CRE. This is from a Prologis investor update a few days ago: Look, a substantial amount of that 24% are Fortune 100 companies. And somebody in their legal department probably said, "Send a letter to all your landlords and ask for rent deferral. Why not?" We're not going to give those people. I mean I think people should not use this market condition opportunistically. I think that's really a bad thing to do. I think people should do the right thing. We should be here helping the people that really need help as opposed to trying to extract an economic advantage. We're just not going to stand for that. They're valued customers, but they need to behave themselves. We're not going to take money out of our shareholders' pockets and put in other major companies' shareholder pockets just because they ask for it. Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

Equity Residential (NYSE: EQR) today announced that through April 7, the Company collected approximately 93% of its monthly residential cash receipts for April 2020 and the Company is working with the remainder of its residents on payment options. http://investors.equityapartments.com/file/Index?KeyFile=403555723 I guess they have better tenants than average

Q: How much in tariffs would he have to add to "foreign oil" if U.S. already "~energy independent producer"? Just close off foreign imports altogether? Would it matter though as U.S. demand for oil has also cratered? Will WTI trade at a wide premium to Brent and will refiners get hosed? Or will refiners pass those costs to Americans who, though financially struggling, will willingly buy $3-4/gallon gasoline to fund the welfare for the oil industry so it helps DJT's reelection bid? why do people keep saying this? How many times have you been to the pump last 2 weeks? Yes, some businesses will have higher costs, but they, along with individual people are getting loans to offset the higher costs and more. More oil worker voters than truck company owner voters (many of whom just pass on the gas cost to their corporate customers anyway). The demand for transport will still be there. We still need things to get to the store and to us. Not as much as before, but higher oil prices won't kill transportation companies. As soon as most of the country goes back to driving regularly Trump would dump the tariff. At least I assume that's what he's thinking. I don't think it's healthy, just trying to think like he thinks.

That's interesting. From what i read a lot of lower-income people losing their jobs right now, will actually have more money coming in than before (combination of unemployment and the check from Mnuchin). How fast do you get an unemployment check after you file in the US. There might be some cash flow mismatch, but my impression was that for a couple of months most people will be able to scrape by.

Dalal--we are seeing the world in a very similar way these days. Ships going to earn their market cap in a year. You guys are 2 weeks late on the tanker trade. Tanker storage does not make much sense at anywhere near today's day rates. You really need oil to reverse everything it has done in the last 24 hours Skate where the puck is going. Nothing changed by Trump's tweets except a spike to spot. I don't see how there won't be a massive oversupply of crude for the foreseeable future. Day rates move around, but the overall thesis is pretty good if you believe there will be a significant oversupply. Not a major fan of tankers FWIW, but think the trade makes sense. I'm having trouble with this one as the thesis seems very obvious. If everyone knows that Wayne is going for a backdoor tip-in, and they just let him skate there, then is he really in that great of a scoring position? I agree. The tanker storage trade is no secret. It's all over Bloomberg TV, FT, etc. I was in the trade and when I saw all the media attention I got nervous and had my finger on the trigger. Sold the second trump tweeted.

They are in energy ETFs which people are selling hand over fist? Throwing the baby out with the bathwater? Pure speculation because I honestly don't know. sorry, not trying to pick on you, but are you sure that's correct? https://etfdailynews.com/stock/DHT/ https://etfdailynews.com/stock/TNK/ I don't see the major energy etfs on those lists.

Dalal--we are seeing the world in a very similar way these days. Ships going to earn their market cap in a year. You guys are 2 weeks late on the tanker trade. Tanker storage does not make much sense at anywhere near today's day rates. You really need oil to reverse everything it has done in the last 24 hours

What's the 6-month brent contango right now? you can calculate the breakeven daily rate for a VLCC in order to make any money on storage (add some margin for the trader, insurance etc). The numbers made sense last week, but they don't make sense today anywhere near where day rates were a couple of days ago. day rates are likely coming down hard unless the contango move back up to where they were before trump opened his mouth.

Do you know how I know you don't live in Texas? Fair enough. Everyone outside of Texas hates oil companies. But even there the number has to be close to 50%. Maybe even higher in Austin... But I think most Americans like energy independence and recognize the national security aspect. Especially post-coronavirus. I believe a tariff would be pretty well received. Do you think most people value long-term intangible things like "energy independence" over higher prices at the pump? Will tariff revenues be used to offset a cut in the gasoline tax? (I assume tariffs would also be imposed on refined products.) More broadly, if a large percentage of oil production in the US were shut-in (and new drilling went essentially to zero), how long would it take to restart that shut-in production and how much damage would there be to reservoirs? It seems to me that we'd do more to preserve our energy independence by leaving it easily accessible in the ground and taking advantage of foreign sellers willing to sell us oil at very low prices. How many times have you been to the pump last couple of weeks? This tariff would not be forever. For right now, I think it will make a lot of sense to trump (not necessarily make sense to many of us).

Any thoughts on the Newtek baby bonds? NEWTL and NEWTI YTM in the 13-14% range NEWT is the largest or 2nd largest SBA 7(a) lender. They only do first-lien loans. The portfolio looks like crap as I'm sure it does with most BDCs these days. But I think as such a large SBA lender, it's in no one's interest for it to go under. The SBA lenders are apparently going to get great fees for processing all these coronavirus sba loans as per https://www.ft.com/content/c584885c-6d64-4531-99e6-334c6ec0c57c "Banks will receive processing fees, paid by the federal government, for making the loans. The fees will vary with loan size: 5 per cent for loans under $350,000, 3 per cent for loans under $2m, and 1 per cent for loans greater than $2m. The loans will not incur a capital charge." They quickly sell off the guaranteed portions of the loans and then securitize the unsecured portions once they warehouse enough. I imagine the unguaranteed warehousing is dead for the foreseeable future, but these new SBA loans are 100% guaranteed and there should still be a healthy secondary market for them. They are also interesting because they have several business support subs that do payment processing, IT, cloud etc. This let's them double-dip on loan clients and also generates some leads for the loans going into the other direction.

Someone sent me a private message about UMH, asking about their occupancy during the GFC. I'm posting my response in case others are looking at it. Hey, Please post in the thread so we can all benefit from the info. congrats on the great entry. I also own the D prefs. You can look at the occupancy disclosed in the annual 10-k report on sec edgar the occupancy did not fall significantly in 2009, 2010, or 2011. I was surprised myself. Some people moved out but many moved in to replace them. I was likely because it's so expensive to move these "mobile" homes. The provisions for doubtful accounts did go up during that time, however. They are not a bank so their disclosures don't make it easy to see how those accounts resolved. I think what is different this time vs 08 is that many more people are losing their jobs all at the same time and politicians like Chuck Schumer are on tv telling people they don't have to pay rents. UMH has a significant amount of Fannie/Freddie guaranteed mortgages which allow them to defer mortgage payments if they agree not to evict. I forget if I ever found a % number for guaranteed mortgages but the 10-k shows most of the recent refinances have been with Fannie.

You have a point. But in downtown Toronto specifically, which i was alluding to, it's just not the kind of market where someone with no buffer would own and rent. The market is just too expensive for lots of bad credit amateurs to be involved. The market has moved up strongly last several years so most unit owners would have plenty of equity to borrow against. Most responsible owners already have home equity lines set. There will definitely be downward pressure on rents and market values, but i don't see mass distressed selling or the banks tanking over real estate and liquidating.

If you take out NA demand you also have to take out NA supply. US won't be exporting anything at 20 bucks a barrel. so I'm not sure if the price would collapse. US would just disappear from both the supply and demand side. I do realize I'm oversimplifying because certain refineries are geared towards certain types of crude. But big picture, I don't follow that the global Brent price has to collapse in a US tariff scenario.

No. I just used a bad source. I'll update the post above

Agreed. I only mentioned HST due to the method. Have you looked at the manufactured housing space? By that simple approach: ELS - 12.2Bn EV / 156,513 sites = 78k per site (but 80k of the 156k sites is RV) - average rent $675, sites mostly on the coasts. 90% of revenue is annual recurring. only 10% is seasonal/transient RV. SUI 14Bn EV / 141k sites = 99k per site - average rent 997, site mostly on coasts. half the communities are age restricted UMH 1.3Bn EV/ 23,100 sites = 56k per site - average rent $447, sites mostly in Pennsylvania and Ohio. UMH also has a growing business of buying and owning the homes in order to rent them. This speeds up the turnaround of their communities since they tend to buy crappy parks that are ~60% occupied when acquired. They demolish the old houses, stick their brand new houses for rent, and that then make the community much more appealing for regular clients who buy their own home. On the negative side, UMH is family-controlled and shareholders have been complaining about the value leakage to the family for years. UMH and ELS look most attractive to me depending on your risk tolerance. The cheaper tenants at UMH are more likely to lose jobs, go delinquent etc. ELS also has better management and shareholder track record.

It’s not anti dumping be sure the Saudis and the Russians still make a profit. Anyways, the tariff would just be a tax on consumers since the US also exports crude. Adjacent industries (petrochemicals, refineries) probably would need to close because they are not cost competitive. The more i think about it the more i think it's likely Trump does agree to a temporary tariff on foreign crude. It's just his style. You said that refineries will close...they are already closing. The adjacent industries work at $40 oil during normal times. Right now they don't work at any price, so why not do the temporary tariff until demand comes back? trump can say he saved millions of energy jobs. I don't want to get into a political discussion about whether it's the right thing to do, but instead, discuss how likely Trump is to make that decision. If it does happen, what are the second-order effects? What happens to all the oil coming out of Saudi Arabia? Does the spot price in Asia also jump? what about tanker demand?

Thousands of condos in Toronto were being rented out short term on sites like Airbnb, especially downtown where there is lack of hotels. All those rentals are basically dead now, and I suspect even after the lock downs are lifted tourism will be down for a while. It will be interesting to see how many of those condo owners can survive a downturn and if the high RE prices can be sustained. I suspect many of the airbnb hosts will switch their units to long-term rental. This will bring down rents in the downtown core but why would they not survive? now...those that had a "business" of signing 12-month leases just to turn around and throw it up on airbnb...those guys are gonna get smoked.

and also this: WeWork Asks Landlords to Help It Cut Its Rent Bill by Up to 30% https://www.bloomberg.com/news/articles/2020-04-01/wework-asks-landlords-to-help-it-cut-its-rent-bill-by-up-to-30

That really is a simpleton's spin on it. He forgot to mention gasoline and diesel prices would rocket back up for everyone while helping the oil workers.

I agree with your general thought process. But I also agree that some of the headlines from property owners will be pretty dismal next few weeks so we might get chances at better prices. Also wanted to add that I like how you try to simplify the value proposition. Like price/unit or the price/room as you did with HST. What I really want to do is take advantage of this crisis to buy into real estate assets at cheap prices. The public market is falling faster than the private so maybe after the reits recover I'll roll the money into the deals on the private side. At the end of the day I'm agnostic to the avenue of purchase. Big picture, western governments can't stomach residential RE falling more than maybe 20%. When the stock market falls, the (incorrect) perception is that only a few rich pricks get hurt. But falling residential RE hits many (most?) voters hard and they start sharpening the pitchforks. Politicians realize this.

40% of N.Y. Tenants May Not Pay Rent This Month. What Happens Then? https://www.nytimes.com/2020/03/31/nyregion/coronavirus-landlords-eviction-tenants.html

I spoke with a RE investment banker in Canada. The commercial department of the bank has bank-wide approval to switch any RE loan to Interest Only without further specific case analysis. Most of those loans are retail and office, but also some multi-family portfolios of their large clients.