Is Wall Street Giving Landlords a Bad Name?

February 01, 2020

Wall Street on Investment Tear

A recent report by Bloomberg is uncovering a serious threat to landlord’s reputations and could encourage the rent control movement.

That would be a big blow to Wall Street Investors, whose short term outlook could collapse back onto them. It’s a bigger threat to SMB landlords who it is revealed are more responsible with their tenants.

The report tells the story of a 44 year old father of two in Atlanta, Georgia who was evicted by a Wall Street Investment firm. The trend is increasing and evictions are twice as likely in Georgia. Yet whether the eviction was justified or not, it seems some of these investment firms are quick to kick tenants to the curb.

Study: Wall Street Landlords More Likely to Evict Tenants

Bloomberg cites a study done 4 years ago by the Atlanta Fed, which showed SMB landlords were less likely to evict. Based on the stats Bloomberg presented, it seems to suggest that some big investment fund managers may be under big pressure to evict to keep up to profitability expectations.

Wall Street is overly competitive and its management style might reflect the focus on short term profitability goals.

Hedge funds, large investment firms and private equity companies bought up a lot of properties after the last big recession. They turned them into rentals and became perhaps, reluctant and accidental landlords.

Yet rental property as we now know has been a lucrative investment for a number of reasons – property price growth, rent prices rising, and tax advantages.

Those who bought rental properties are looking like geniuses now. But is Wall Street creating some worrying vibes that could ruin landlord profitability for tomorrow? And will this lead to more vigorous adoption of rent controls and new laws that make business difficult for conscientious landlords?

Homes4Rent & Havenbrook have a 25% Eviction Rate

Bloomberg report in its story that American Homes 4 Rent, one of the nation’s largest operators, and HavenBrook filed eviction notices at 25% of their rental houses. This compares with an average 15% for all single-family home landlords according to their report.

These high eviction rates can translate to significant dollar losses.

They cited Colony Starwood Homes as having initiated eviction proceedings on a third of its properties, the most of any large real estate firm.

Wall Street Landlords – courtesy of Bloomberg.com

The report from frbatlanta.org found that overall, institutional investor owners of single family rentals are 8% more likely to evict than small landlords.

With rents rising faster than wages in the US, Canada, Germany, UK and Australia, the issue of tenant evictions is being talked about more. Atlanta is one of those cities where renter protections are weaker and tenants can find themselves homeless quickly.

In California too, rents have seen double digit increases and that’s resulted in re-instituted rent controls.

Dealing with a Bad Reputation

It might be in the nature of the housing rental business that conflicts, disappointments, and profitability happen.

So if you’ve been trapped in a spiral of poorly qualified tenants, rising rents they’re having trouble paying, costly repairs, and avoidance, maybe you can still turn it around?

Here’s 12 Good Ways to Lift Your Landlord Reputation

improve communications — listen to your tenants and understand what the issues really are and manage complaints right away
be compassionate — encourage tenants to respect themselves and take care of the property
keep an eye on their rental payments — don’t let them get behind and inquire about their jobs and cost of living
deal with key points of contention — if it’s bad, you must find a way to resolve rather than dismiss it or neglect
do tenants surveys — discover what they think and feel
enact a regular schedule of maintenance and repairs — regular management says you care
do something good in the community and publicize it — pubic relations can pay off
use a good landlord software — let them view their leases and other documents which reminds them of their responsibilities in your business agreement
help them find another apartment or house — if they can’t afford to live in your unit
screen all new applicants well — so you don’t get problem tenants in future
create a good website and Facebook page — be more visible, transparent and active online
write a nice reference letter – when the tenant leaves their lease, give them a proper, accurate reference letter

Your tenants may not see your behavior the way you do. Your business efficiency, lack of communication, and low responsiveness to unit condition and their issues may be interpreted poorly. That means your tenants complain more and louder, call the tenant/landlord board or city, post on social media, and contact news journalists.

Such a bad landlord reputation can cause you legal issues and costs, eviction procedures, and higher vacancy rates. Your bad rep will permeate your real estate assets.