1 big thing: Squatters challenge landlords

An estimated 1200 Atlanta-area homes are occupied by squatters, putting investors in an untenable situation.

Why it matters: When a house is occupied by squatters, landlords can have a hard time getting them out so rent-paying tenants can move in. Atlanta is currently one of the largest US markets for institutional landlords, but if the problem continues to grow, that might not always be the case.

Lost revenue isn’t the only problem: Squatter houses can also be dangerous.

  • Cleaners and construction employees tasked with clearing out a squatter’s belongings sometimes face confrontations and even violence.

  • Property managers tasked with checking in on supposedly vacant homes have been met with gunfire. Some now flat-out refuse to enter empty properties.

Atlanta’s squatting problem constitutes a serious safety risk for property managers, third-party contractors, and even the squatters themselves. It can also have financial repercussions for the property owners since it makes it harder to rent or sell properties.

Root cause(s): There’s no one reason underlying the Atlanta metro area’s rampant squatting issue. Among the chief factors at play:

  • The sheer number of vacant properties in the area

  • The complex logistics of maintaining and inspecting properties

  • The housing affordability crisis and growing rate of homelessness

  • Inadequate social services for populations vulnerable to homelessness

  • Complex, bureaucratic hurdles in the current eviction process

Waiting for solutions: Efforts to deal with the squatting surge systemically and at the government level have been feeble and ineffective.

  • Some property owners and managers are reduced to offering squatters money to leave. This doesn’t always work, and it shouldn’t be their burden.

  • Cities need a multifaceted solution that addresses both the problem and its causes.

The bottom line: There are two here:

  • Strong security measures and meticulous property management will be more important than ever if you have property in a market with high investment activity.

  • Owners, managers, and local governments need to collaborate on practical solutions to mitigate risks for individuals and investments—and put an end to the squatting problem.

2. Changes ahead for the Accredited Investor Standard

The United States Securities and Exchange Commission (SEC) is thinking about changing the definition of an “accredited investor.” The move would have significant implications for real estate investors, developers, and others who rely on this type of accreditation to get their projects moving forward.

Why it matters: Having an agreed-upon definition of “accredited investor” helps developers find sophisticated, financially resilient backers for their projects.

What’s happening: Advisers to the SEC are recommending a range of modifications to accredited investor standards. In general, they suggest two routes:

  • Narrowing the definition of “accredited investor” to account for inflation.

  • Expanding the definition by incorporating new standards related to the financial acumen of accredited investors.

  • Other options try to balance protecting less experienced investors while keeping the economy growing.

What’s new, and what isn’t: The status of accredited investors has always been in flux as the SEC expands and contracts its pool of eligible investors.

  • But this time, the SEC seems to be deliberating more dramatic changes.

  • The reason: The SEC wants to find a more comprehensive way of vetting a potential investor’s ability to withstand loss. Credentials and financial thresholds alone may not adequately capture fiscal resilience.

Some proposed addenda to the standards for an accredited investor include:

  • Adjustments to net worth and income levels, adjusted for inflation

  • The introduction of a FINRA-administered exam

What’s at stake:

  • If the pool of accredited investors shrinks, real estate developers and investors may find themselves in a more challenging than usual fundraising environment.

  • But if the pool grows, the real estate market could become flooded with fresh capital—and greater risk for new investors just getting involved in real estate.

The bottom line: Real estate professionals who want to stay informed should monitor the SEC’s deliberations and brace themselves for possible changes in private investment capital distribution.

Greg Bond is a successful commercial real estate investor and property management guru. He started out in his family’s map-making business. But when technology made paper maps obsolete, Greg learned how to educate himself on new ideas so he’s comfortable with taking risks. He started out in residential but he’s quickly shifted into industrial real estate, using 1031 exchanges and accelerated depreciation to maximize his return on investment. Listen in on our conversation in your favorite podcasting app, or watch us on YouTube.

3. Catch up fast

  1. Florida Legislators want to make it easier to kill bears. Newsweek

  2. The Dept of Justice weighed in on the settlement of one of the MLS commission lawsuits, saying the settlement itself may violate federal law and suggesting strongly that commission payments for listing and cooperating agents should be decoupled. Reuters

  3. Various real estate industry experts weighed in on the DOJ’s commission decoupling arguments and see nothing good for buyers’ agents if it comes to fruition. HousingWire

  4. U.S. jobless claims fell to their lowest rate in five weeks, dampening hopes that the Fed will cut its lending rate any time soon. Yahoo Finance

  5. A South Florida bankruptcy judge has extended the deadline for homeowners to file claims in MV Realty’s Chapter 11 bankruptcy case. ALTA

4. Closing Thought

If anyone knows “on stage,” it’s Sir Elton John (far left), performing at Caesar’s in Vegas on May 5, 2018. Photo: Joe Seagle

Backstage conversations should remain there and never show up on stage.

Why it matters: Customers and clients can be turned off when that fourth wall is broken in a business so they hear how the sausage is made.

A story:

  • Last Wednesday, we stopped into a national chain’s local “bakery cafe” for lunch.

I’d noticed a lady sitting alone at a primo booth in the back corner, big enough for six, surrounded by windows on three sides. She had her laptop open, two iPhones beside it, and paperwork spread everywhere.

I assumed she was another customer working from there today, where she could have endless drinks and fresh cookies. I was wrong.

She said, “Hey Albert (*not the real name, to protect the innocent). I’m Sue. Please confirm your phone number.” Then I heard, clear as day, “828 ……” She wasn’t wearing headphones on this — what I learned from their conversation — an interview of a potential employee for this cafe.

During the interview, I learned that Albert has a few tattoos, so he must wear long sleeves at work.

  • He also needs to trim up his facial hair.

  • He doesn’t have much cooking experience, but he graduated from HVAC Repair school with a certificate in that, and he worked for a while as a cook at Arby’s.

I also learned that Sue wasn’t just the seamstress for the band. She’s the regional manager for this bakery chain, starting herself in the kitchen years ago.

To say that this backstage conversation was a complete brand-vibe killer for lunchtime customers is an understatement.

I was taken back to the first time I saw a backstage conversation as a customer. I was 14 or 15 years old, and Mom and I were at a local shoe store for back-to-school shopping.

  • Our fun afternoon of shopping was shattered when we heard a manager screaming at one of his employees, calling her names and telling her how stupid she was for bringing out the wrong size shoe for someone.

  • The employee just stood there sobbing.

  • It was pretty traumatizing for me since I still see her vividly in my mind 40 years hence.

My mom, who had herself owned a clothing store for years, looked at me and said, “Never do that. He’s a jerk, and you never want to do that in front of customers.”

The bottom line: Good leaders and their employees understand “backstage” versus “on stage” and the appropriate conduct in each.

  • Companies that protect and project their brand consistently for growth, trust, and confidence keep those uncomfortable, technical training, correcting, or personal conversations out of the view and earshot of customers and guests.

In case you were wondering, Sue told Albert that he’s hired, but Albert had to break the bad news that he has a date with his fiance on Saturday and, alas, can’t start work until Monday. I hope he trims his beard and wears a long-sleeve shirt that day, or Sue is sending him home.

We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.

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