How These 7 Landlord Laws Shape Returns, Liquidity, and Investor Risk | Ep 112

James: A lot of investors don't think that they need to worry about legal stuff because either their sponsor or their property manager is gonna have it all covered for them, but that's not really true because there's at least seven types of laws that you as an investor should be aware of. Just to cover your own legal self, you can't just depend on that other person.

And so we're gonna talk about those today on the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing, which includes the legal side of things. And our mission is to equip people, um, to invest wisely in both properties and residents so that together we can build wealth while improving housing.

I'm James, and this is my wife Jessie.

Jessi: I am here. I was actually kind of distracted thinking about the pile. Stuff. We did some cleaning before the holidays. Yeah, we just kind of piled up. We have this philosophy, which has nothing to do with the podcast, but this philosophy that it's like, ah, it's hard to get rid of this.

I don't like, I don't wanna let it go. And we're like, okay, you don't have to let it go yet. Just put it in a box or put it in the garage, or move it out of your living space and then we'll see a month, two months from now.

James: Yeah.

Jessi: If you can live without it.

James: Still in the garage and it's cramping my style personally.

But yeah, feel free to get rid of it all. I'm cool with that.

Jessi: I know. 'cause none of it is your stuff.

James: I know. It's all the kid stuff. It's

Jessi: just me and the kid

James: stuff. Yeah. No. Yeah. The

stuff

Jessi: I don't.

James: Yeah. Well there is some stuff that people would like to get rid of and never have to worry about again. Mm-hmm.

It's true. Like some legal things, which is often, honestly, that's a good reason why people get a property manager specifically.

Jessi: Right.

James: But also why people do the passive investing deal so they don't have to deal with all the legal stuff and the worries and things like that.

Jessi: Yep.

James: Which to a degree is true.

However, there are some things that is important for investors, passive or otherwise to be aware of. Just, if anything, it helps you ask the right questions and, um, 'cause you are not necessarily, you're not, um. There's still some legal oblig, ob. There's still some legal ob, oblig

Jessi: oblig.

James: Legal obligation.

Jessi: That's a good word.

James: Yeah. There you go.

Jessi: Oblig.

James: Oblig.

Jessi: I like that.

James: That sounds a word. We're going with it.

Jessi: OB oblig.

James: Yeah.

Jessi: Obligation.

James: Yeah. Good responsibility. So I, um. I, I was reviewing an article, um, from 2015, actually long ago, and so I was kind of talking about this, I know, over a decade. And, and so, uh, I was like, yeah, I think this is good.

Um, to bring up as a reminder. So BiggerPockets gets a little bit of the credit for, um, the seed of this thought. Um, it's kinda where I'm pulling it from. So again, you don't necessarily need to know the exact. Tenant landlord laws, but you, you should have an idea of what they're at, which helps you mitigate risk.

Jessi: Yeah.

James: And what's going on. So let's dive into it. Law number one.

Jessi: One,

James: there are state regulations that you need to be aware of because every state defines things like security deposits, lease termination, eviction process, and tenant protections. Mm. Like again, you don't need to know the exact wording, but you should have an idea, especially in states like Oregon, for example, when you, um.

The way you terminate a lease is very specific, and it depends on whether it's less than a year or it's been more than a year, which matters for your underwriting timelines. Mm. On like, Hey, hey, how fast can we increase rents or move people out and do things like that? Mm-hmm. So you wanna know that for when you're evaluating a deal?

Jessi: Oh

James: yeah.

Jessi: So is that just to double check your sponsor?

James: Yeah, in a way

Jessi: because I mean, they should obviously know that. But if they didn't, they

James: should

Jessi: for some reason.

James: And, and the sponsor may not, whoever the property manager is the one who should know that. Yeah. Yep. But you wanna ask questions like, what's the real eviction timeline for something?

Because in theory it's like, well, like in Oregon for example, if someone doesn't pay the rent, well, okay, fine. They had until like the fifth to do it. So you're gonna give a notice on the sixth, and even then it's gonna be a 10 to 13 day notice.

Jessi: Mm-hmm.

James: And then once you do that, then you're going to the courthouse to actually file.

And then they're sending a court date that's a week and a half to two weeks later and depending on three weeks in how that goes. Yeah. Like, so you gotta know that kind of stuff. And you gotta know like, well, how fast can we actually increase the rent? And by how much? And what are the assumptions underneath there?

'cause like in states like Oregon, it's not just whatever. Yeah. And it's not however much you want.

Jessi: Yep.

James: And so that kind of, that things matter. And then you might ask questions like, what tenant protections, meaning, meaning, blah, blah, I got this tonight. Meaningfully constrain operations.

Jessi: Mm-hmm.

James: Which again, in Oregon, once they've lived there for a year, the only way you can terminate a lease is for cause.

You can't just say, nah, we're good. Now obviously there's things like a cash for key strategy that can still definitely work. Mm-hmm. And I would recommend, but that's kind of the, the idea, um, behind I'M ing you wanna, you want to know what your state regulations are mm-hmm. For those things. And there's some really good, uh, other resources out there that are kinda like, here's an overview, here's some thoughts for 'em.

Yeah. Um, another one, dude, it's just a, it's a mindset thing. Leases are not paperwork. They are enforceable financial instruments.

Jessi: Ooh. That's a good statement.

James: Yeah. And I think

Jessi: like they're valuable pieces of paper, but

James: Yes. And I think oftentimes you're like, oh, whatever. Um, we, like, you gotta make sure that that's not in, like, that it's not incomplete.

Jessi: Mm-hmm.

James: That it's not just done sloppily. That it's not just selective compliance that you're looking for, whatever's in the lease. Like, no, we gotta hold up to it. Mm-hmm. And you just gotta be aware that there's some litigation leverage for tenants in states like Oregon.

Jessi: Yep.

James: And, um, yeah. So you wanna ask things like, and this one should be pretty easy.

Are leases standardized and professionally reviewed, or are they just like legacy leftovers?

Jessi: Mm-hmm.

James: Um, like for us, we use leases from an organization. Mm-hmm. A few of 'em, they all kind of use the same lawyers to write 'em and they work with 'em to make sure they're good. Like, yeah, we just pay the money and just use, it goes, why not?

Um, it mitigates a whole bunch of risks.

Jessi: What would be an example of like perhaps a lease that was incomplete or a tenant? You know, head ground to stand on.

James: So I had a, I have a friend, uh, he was looking to rent from somebody else. Mm-hmm. So not us. And he brought me the lease agreement and I was like, what?

Like, I was reading it, I was like, this makes no sense until there was like one line in there that was like, it was talking about, and this lease shall pertain to all the rules in Montana. I was like, what the, and so it was like they found some random lease online or maybe they lived there. I don't know.

Huh. Downloaded it, printed it, and we're like, here you go. 'cause there was a whole bunch of stuff where I was like, well, that's not legal. That's not legal. That's not legal. Interesting. And it's 'cause of some of that, the different state regulations. Yeah. It was just, it's just different in that state. And so I told 'em, I was like, I would not, yeah.

Sign this, fill this out, I mean, or sign it and then never pay your rent. 'cause this won't hold up in court. It's up to you. Yeah. And so, um, so you get that kind of stuff where I, and I think too, if you just have someone who's been. Been a landlord managing for a long time. Like especially like, like the more like the individuals doing it.

Mm-hmm. Yeah. They might have their lease agreements they've been using for 20 years.

Jessi: Yeah. Just boiler plea.

James: They're like, yeah, whatever. Its the same thing. Updated, right?

Jessi: Mm-hmm.

James: And yeah, you gotta rules change every year, so you wanna make sure that they're updated. Yeah. It's not just paperwork. It's actually important.

Jessi: So a good question for the sponsor might be where do you, where do you get your lease agreements? Yeah. Do you use a third party company that. Updates them each year. Yep. Or do you have just a boiler plate one or,

James: yeah, exactly. Yep. Yep. Cool. Totally. Or did you hire your own lawyer? I guess, which I wouldn't just use the, just use the standard ones.

They're so much cheaper, um, to do that. Uh, yeah. Other things that I think are important to know is just what privacy and access rights exist mm-hmm. For tenants. Um, just because like. Entry violations, they don't necessarily feel like they're a big deal. Mm-hmm. Until they are.

Jessi: Yeah.

James: It was funny when I first started managing, um, rent by the room types of place, like co-living situations, right?

Jessi: Yes.

James: I had one where, honestly I didn't think much of it. Mm-hmm. Where it was, um, it was a house that it had someone, their unit down below, but then up top were just three units and I did a showing. Mm-hmm. And, um, I didn't give any notice. I was like. Okay. Not a big deal. I, in my head, the kitchen and bathroom and hallway, there was just common area.

Jessi: Mm-hmm.

James: But, and I had recently taken over, but the, one of the tenants really thought that. I was like, no, that's like, that's my personal space. If you're gonna come. I needed 24 hour notice even for those common areas. Mm-hmm. Um, which we've got another place that's a house. Mm-hmm. And that one really is like.

If there's 15 people who live there in the common area, it feels like a common area. And we've set the, the, the culture's like, no, we come by at least once a week and we just check on things. Mm-hmm. And it is

Jessi: what

James: it is. Mm-hmm. And, um, but this one it just felt, which I hadn't really thought about

Jessi: Yeah.

James: Until the person mentioned it. She was like, were you here? There? I thought I heard someone in the hallway. And I was like, yeah. Ing I was. And so she was like, yeah, I like notice.

Jessi: Mm.

James: It's like, because apparently like she treats it more like, she was like, I don't know, like. Like she's whatever, she's, it

Jessi: makes sense.

Yeah.

James: Yeah. She

Jessi: just wants

to

James: know who's

Jessi: around.

James: But there's things like that, which now obviously we give notice and that was a nice little learning thing for me. Yeah. And so, but again, it didn't seem like a big deal, at least not to me. Again, I wasn't even on my radar until, um, until she said something.

Right. So, um, makes sense. I think that's kind of. You can have those small little errors can turn into bigger things. Sure. I guess is what I'm trying to say. And so as a, um, as a person evaluating either a sponsor or a property manager, you might wanna ask about how disciplined they are about their systems.

What do they have in place and is there documentation or any notice tracking process? Like, what does that look like? Like for us, anytime we serve a notice, uh, we keep a picture of, we. Um, we keep a digital version of that document. Mm-hmm. Mostly 'cause that's how it gets created and then we gotta print it.

So we just keep it, but then we'll also take a picture of when it was posted, just like, Hey, yeah, we did this. Yep. So it's there.

Jessi: It's like when the postal system or. Amazon delivers your package,

James: right? Yeah.

Jessi: Would

like left it

there like to thank your guy for delivering it to you?

James: No, not really.

Jessi: He stars, but you get,

James: um, yeah, I'm like, I, he dropped off a package.

I don't know. I dunno how to think about this. Um, I think law number four that you should be aware of is the Fair Housing Act.

Jessi: That's a

James: good one. Uh, FHA. There's just a lot there. And, um, 'cause they can't, they may not just be like legal things. Like it can be, it can really affect your brand and a whole bunch of things.

And what's what's interesting about like the, the FHA stuff is it can, it can cause a lot of problems for you. So like, as, uh, like. One accusation, it could potentially freeze up capital. Mm-hmm. It could kill refinances. It can end institutional relationships. Like it's, you don't wanna mess with that, uh, piece of it.

So you'll ask questions like, well, does the sponsor or the property manager, how do they train their staff? Um, like how are decisions documented? Um, is the advertising standardized? That kind of stuff. Which for the most part, ours is.

Jessi: Yeah.

James: And, um,

Jessi: does the Fair Housing Act cover screening policies as well?

James: Yeah. Yeah. Think of it as like, I, I think of it as like, it's the whole discrimination thing.

Jessi: Yeah,

James: yeah. You just want, really

Jessi: wanna make sure I treat everybody fairly all the time.

James: Yeah, yeah. Right. Yes. Fairly and the same. Yeah. It's consistency is the, is the trick there. Yeah. Um, kind of related to that law number.

Well, not related, it's just shares part of the name. Sorry. Law number five is the Fair Credit Reporting Act.

Jessi: Mm.

James: Um, is another one, which is always the, I always try to pronounce it whenever I see the acronym's, like the fcra, it's not Right, but whatever. Um, but more importantly about that one, it's not that, it's how you're handling the sensitive information is how you want to think about that.

Right. Um, because. If you don't do it right, you just get in trouble for not handling their, um, their information properly. Mm-hmm. So, like, I don't, um, like, so there's questions you wanna ask like, well, who handles tenant data? What systems control access? What happens when staff turns over? Mm-hmm. Great questions.

Um, that's funny actually. Um, I was talking with a guy, um, recently and he was talking about how his company, they do all their communication over text. And, um, which is totally fine mm-hmm. For his company. But I was like, oh man, I like, I don't, we don't do that because that text message. If someone ever leaves, like all that information is still with them.

Like if I'm sending them tenant information or addresses and codes. Now obviously there's not much I can do if they copy it somewhere else.

Jessi: Mm-hmm.

James: But at least for me, like since we do all of our primary communication through Slack, like once, once someone leaves, like yeah, we just revoke access. They're done.

Same with all the other systems where we don't even. I mean, we do email some stuff, but they all use a company email that I can remove access to on that.

Jessi: Mm-hmm.

James: Again, it's not that I can do if they decide to copy it to their personal laptop, but that's true for everybody.

Jessi: Yeah.

James: And so, um, but yeah. But those are the kind of things like you wanna pay attention to.

Jessi: Mm-hmm.

James: Yeah. Yeah. Remember back in the days when you were pulling all those credit reports and stuff

Jessi: mm-hmm.

James: Remember doing that?

Jessi: Yep. Yeah. I, I think we kept paper files. For a time.

James: No, I think we were always digital. We would scan stuff in. I had that little baby scanner.

Jessi: Yeah, we did have a baby scanner.

James: Yeah.

Jessi: We had paper documents for applications and different things. But then scan everything in.

James: Yeah. Yeah. Um

Jessi: hmm.

James: Yeah. I think for a lot of the things we try to digitize as fast as we could.

Jessi: Yeah.

James: Um, 'cause I was just, I was into that. I don't wanna have to worry about paper stuff.

Jessi: It's all digital.

James: Yeah.

Well, yes though, I just took over a, a property and the, the old manager just handed me a file box of all paper files.

Jessi: That's what that box was on the

James: on

Jessi: table.

James: Yeah. Yeah. I was just like. What, what is this? And, yeah. No, it's all just, they said they, everything was paper.

Jessi: Wonderful.

James: Which I guess on one hand you don't have to worry about things getting out if it's like, if it's a physical document.

You gotta secure it and store it somewhere. Yeah. And technically now they don't have a record of it. Like they don't have to worry about it. I'm like, oh man, that sounds miserable. So I'm gonna scan it all in and digitize it all. Mm-hmm. And then it will be in a secure space. That way we're good. And then if someone ever leaves, I can revoke access if someone needs it.

It's easy to share.

Jessi: Interesting.

James: Yeah. Yeah.

Jessi: Oh, work.

James: Um, law number six mm-hmm. Has to do with habitability and liability. Yep. 'cause habitability laws, uh, can convert deferred maintenance into legal exposure.

Jessi: Yeah.

James: Could be a pretty big deal.

Jessi: That's true.

James: And I think it's also like it matters for what you're gonna spend for your CapEx.

Jessi: Mm.

James: Right. And you really, in some ways you can think of your CapEx as like, in some ways it's a risk mitigation. Not just aesthetics.

Jessi: Mm-hmm.

James: And so this is actually something we think a lot about when we're doing our flips, is that whole, well what, I mean we couch it in terms of like what makes this house lendable.

Mm-hmm. But that's really like, what do we do in to get that minimum habitability standard?

Jessi: Sure.

James: And then we sell it as fix upper.

Jessi: Yeah.

James: From there. But like that's a really important one. That's

Jessi: some examples of like habitability issues.

James: For like rentals or, or

Jessi: like, like one of those flips. Oh, you know, you're like, you do the things to make it

James: habitable.

It's a mold, it's like a big one. Ah. Um, having a, which related, could be like a roof leak.

Jessi: Oh,

James: okay. That kind of thing. Um, fixing leaks, not having the, um, this is less habitable, but um, the water heater straps is a thing. Just want it to be safe.

Jessi: So safety types

James: of

Jessi: things.

James: Yeah. Yeah. There's a cleanliness component to it.

Jessi: Is that, does that include things like, um, that are not up to codes? So the way that it's built, or is that less so?

James: Uh, no, less so that part of it. It's more like health and safety.

Jessi: Okay.

James: How to think about it. Electric mean if something was built a, a long time ago and it was permitted and approved back when it was made, like fine.

Jessi: Yeah.

James: But if there's a, like I said, if there's a health or safety concern, um, that kind of, that leads into the habitability though. Interesting. One of the rules is you have to have floor coverings, which is can't just have subfloor, which I find fascinating that that's a rule. Yeah. Um, but I think for the most part, it's probably good.

It just creates weird situations for us, like when we wanna sell a house. Understand, floor know, go in and put in new flooring. And so we have to put in temporary flooring.

Jessi: Yeah,

James: just that's weird. Pass the appraisal and like, all right. Whatever. Then they turn it out. But it's fine. And so, um, one of the things you do wanna ask about, especially for longer term holds, is like, what are the inspection cadences?

What's the preventative maintenance philosophy and what's the reserve strategy? 'cause these types of repairs do come up.

Jessi: Yeah. They're going to happen.

James: Yeah. We're running a new issue right now where we've got an owner who. Uh, the place is habitable. Um, but the tenants are, they want the, they want the entire inside repainted.

Jessi: Mm.

James: And he's just like, I don't have the money for this.

Jessi: Yeah.

James: And because it was so, it actually sent vacant for a while, and now he's getting rented out. We got new tenants who were moving in and they're making some pretty big requests, and he's like, I don't, I don't, I can't, I don't have money. Mm-hmm. So we're having to have tough conversations with the tenants.

We're like, sorry guys. This has to wait until the summer.

Jessi: Mm-hmm.

James: And it's totally habitable.

Jessi: Yeah.

James: It's not, it's

Jessi: just a preferential. Yeah.

James: Yeah. I mean, I get it. It it's, it's a nicer house and so their standards are gonna be a little bit nicer. It's also time of year, like weird people rent, so whatever.

Mm-hmm. And, um, and so, uh, so yeah. So what we're dealing with that, 'cause it doesn't have a reserve amount. Well, he did, but. Of some issues. It sat vacant for three months and that reserve's gone.

Jessi: Yep.

James: So he is like, no, I can't afford this. So we're, we'll get through that.

Jessi: Yep.

James: Right now, uh, law number seven, evictions and terminations.

Jessi: That's,

James: yeah.

Jessi: Good to know.

James: Yeah. Yeah. Um, yeah. Hard truth is cash flow is only real if it's enforceable.

Jessi: Mm-hmm.

James: And. Um, we've got some places that we've taken over where the previous manager just didn't enforce stuff and Yep. It's funny, like, so we, we actually just recently gave a notice to a tenant to move out and, and it was, 'cause we asked him, we're like, Hey, uh, it was kind of, he got assistance for some help for a few months, which didn't even cover all of his background 'cause he didn't pay rent for like 18 months and they're like, well, we can help out with four.

Jessi: Mm-hmm.

James: Cool. I mean, I'll take it. It's great. Yeah, but we, we were talking about him. I was like, so what's the plan moving forward? And he was like, I don't have one. Like Okay, but like, what'd you think was gonna happen here?

Jessi: Yeah.

James: And, but like in the past he didn't have to have an answer. The managers like, they were just like, whatever, whatever.

Didn't even say anything. Didn't even have the conversation.

Jessi: Wow.

James: And so, uh, so we've given him notice.

Jessi: Mm-hmm.

James: And it was just hard, which is really hard. Because I'm like, on one hand I'm like, Hey, thanks for the money.

Jessi: Mm-hmm.

James: But like,

Jessi: yeah,

James: it's a, that didn't catch you up.

Jessi: That's not all good.

James: Where's for the record?

We're we're nice. There's another guy. He's also behind.

Jessi: Mm-hmm.

James: But not only is he paying his rent, but he is paying a couple extra a hundred dollars every single month and slowly catching. I'm like, yes, a hundred percent.

Jessi: Yeah,

James: I'll work with you all the time. And if, and I even told him like, and if you get a month where you can't do any extra fine.

I get it. At least do what your rent is. Mm-hmm. Stop digging the hole and then start catching back up. Mm-hmm. And he is doing it.

Jessi: Yeah.

James: Totally cool with that. And, and this guy's just like, I don't have a plan. Well, I guess I can't help you. Mm-hmm. So, uh, so yeah, but you wanna know, like I said, you want to know what the eviction timelines are like we were talking about a little bit earlier.

You wanna know. Um, what, like, you wanna be aware of, um, like retaliation claims. What are some illegal self-help actions? Like you can't lock people out. Mm-hmm. Things like that. Um, used to be able to, apparently.

Jessi: Wow.

James: I know. Well, so didn't pay rent, you just changed the locks. Done. Hold their stuff ransom.

Jessi: Really?

James: Yeah. Why not?

Jessi: Oh, yeah. You definitely can't

James: do that now. Yeah, not anymore. Oh, yeah, no, that's a, that's

Jessi: a

James: big no no. And so, uh, but yeah, so, um, but you just, you wanna be aware of like, what, under what circumstance can you do this? And so as an investor, uh, again, you're gonna ask questions like, well, what are the real turnover timelines for these things?

Because it's not just, oh yeah, 30 days, we'll go in and move out. Like. When we did our 11 unit apartment building, remember? Mm-hmm. We went through and we gave everybody notice. It was either 30 or 60 days and everybody was gone within a month.

Jessi: Mm-hmm.

James: And, and we were able to go through and do our rehab like that.

Today you're not allowed to do that particular strategy. Mm-hmm. And so, um. You just gotta think different about it, you know? And, um, which is fine. You just gotta be aware of it. And, and we've tried the other strategy as well, like, well, we'll just let everybody live there and we'll just slowly fix it places as they move out.

Mm-hmm. And that strategy did not work as well. Yeah. And so, I mean, cashflow is fine, but just in terms of fixing it up, like some people were just like, no, I'm gonna live here forever. Right. Yeah. Cool. So it's different. I just keep raising rent on 'em. Like eventually it'll, it'll hurt enough. Um, but honestly, like they've all like the, which is half.

Okay. A lot of 'em are on housing assistance anyways. Mm-hmm. So I'm just like, well, they're like, cool, whatever. Just submit it.

Jessi: Mm-hmm.

James: And so their rent goes up by five bucks, I guess. I'm like, I guess I don't care since my CapEx is super low. My rents going up, but this is just kind of weird. But anyways, you wanna know what those rules are

Jessi: Yeah.

James: Is important.

Jessi: Just knowing the reasons why and when you can terminate as well, I think are important. You know, like, like you were saying.

James: Yeah.

Jessi: You can't just, you can't just do things like lock them out or, or close things up or whatever. Or, or stop services, but. There's also reasons why you wouldn't, would or wouldn't be able to terminate the lease, you know?

James: Right.

Jessi: If you're just like, I don't like the way this person looks anymore. That's like, no, that's not a valid reason.

James: Yeah, no, true. Um, I don't like, yeah. I don't like their new significant other.

Jessi: Right.

James: And, and I think it's important as an investor, just man, you should know what you're getting into. Like, you shouldn't walk in with an expectation of like, oh yeah, we're gonna turn this thing over in three months and it's gonna be great.

Like, no, you're not gonna do that. And especially again, if you're hiring a property manager, you gotta know like, nah, they got limits as well. They can't do heroic things. Yeah. For this. They can do a lot for you, but mm-hmm. Not those specific things. And I think, uh, the common thread between these laws, I think it's like a, they just kind of, they slow things down.

Mm-hmm. They increase friction, they punish sloppiness. Mm-hmm. But they reward systems.

Jessi: Yeah.

James: So I think that's the, um, I think that's the, the key takeaways and, and why you wanna know what those are. Mm-hmm. So you just wanna be, we aware of like the spreadsheet samurai type of person. Um, 'cause they might ignore some of that legal side of stuff 'cause they're just throwing it, which could be me.

Uh, 'cause they could just throw it into a underwriting spreadsheet and call it good. Mm-hmm. Which again, I do a lot of that. Helps. Also being a property manager, I'm very aware of the legal side of things. Yep. Um, and so you just wanna be aware of that. Um, you know, the other, that other professional type of person who mm-hmm.

Kind of takes it all into account mm-hmm. And has reasonable. It's funny, I, and I've seen some underwriting spreadsheets where they have a singular time. For completing the rehab and then doing the tenant turnover.

Jessi: Mm-hmm.

James: Like they make that timeframe. It's, it's the same cell, it's the same number. And oftentimes there are in states where it's like, yeah, you can do that however long it takes you to do the rehab.

That's how long it takes you to do a turnover. 'cause you're just like, you're moving people out as you go.

Jessi: Mm-hmm.

James: And I have actually split that into two. Mm-hmm. Because I can do my construction, but I fully recognize the turnover time on the tenant piece to get everyone up to rents. Like those are just two different numbers.

Hmm. And so I often extend it out

Jessi: mm-hmm.

James: Longer just 'cause I know it will. Yeah. And so you want to be aware of things like that.

Jessi: Mm-hmm.

James: And, and how those work. So those are some questions to ask your sponsor or PM to kind of round out this episode. Um, is what law has most impacted your returns? Hmm. So just good to know.

Um, what have you been surprised by? Either positively or negatively? Mm. Just again, thinking legal standpoint and then what compliance mistake taught you the most. I think is, is good. Yeah, that's

Jessi: a good one.

James: Yeah. Um, which I don't know if compliance is it, but you know, that story of me going into the shared, um, living space, like Oh,

Jessi: right.

Be like, huh.

James: Okay.

Jessi: Yeah. Gu to be aware of that. Gotta think about that.

James: Yeah. Again, I've inherited tenants through the, like, there's no lease at all.

Mm-hmm.

James: And so we'll go through and we'll fix that and we'll have those conversations. It's kind of funny, we, uh, we oftentimes, like tenants don't know, they have no idea.

And, and so we'll say, well, we're gonna say a deposit is zero. And it's, that's usually like, that's my test for whether or not they actually read it. 'cause if they're like, yeah, sure. Whatever, they signed it. I'm like, really? Okay, cool. Um, but oftentimes I'm like, ah, actually no, there should be a deposit of like $500 here.

I'm like, sweet. Sounds good. Which I think for those other ones that like, if the time comes to move out and they're like, what's, where's my deposit? I'll be like, you said zero.

Jessi: Mm-hmm.

James: If they're like, well, no, it was actually whatever. Mm-hmm. Like, all right, cool. Whatever. Yeah. I'll be back to you. I don't care.

Um. For the most part, but, uh, 'cause like, I don't know. Nobody knows. Yep. So there

Jessi: no record.

James: Yeah. Yeah. So I think the way you wanna think about the laws is that there's not necessarily that they make limitations for you, you just gotta think of them as your operating terrain.

Jessi: Mm.

James: It's kind of the, the thought and again, guidelines, it rewards systems.

And so if you invest with someone with systems, you'll just do better because it's so. Fun fact, like, uh, AI is kind of all the rage now, and there are certain companies where saying, Hey, we need to create laws to, to manage this and to make sure things don't get outta control, and we need to put controls in place for this, which on the surface sounds good and smart.

Jessi: Sure.

James: But the problem is that what it means is that whoever's already big, they get to remain because someone small is not gonna be able to come in and do all the compliance and mm-hmm. Set up all the controls for

Jessi: it. Right.

James: And so it's a weird way of, I mean, and they, and, and it's one of those, they have good intentions.

It's not all, it's not a hundred percent one way or a hundred percent the other, but they're also like, but this is also pretty convenient that it's gonna stop anybody else from coming in and stealing our lunch. Mm-hmm. And so that's one of the downsides of regulation. Hmm. And so. Again, I think about all the different rules that Oregon's putting in place.

Man, it's hard for someone brand new to come in and be like, okay, you gotta remember to do this. You gotta remember to do this. Gotta remember to do this. As opposed to someone who's, who grew into all these new laws, like, okay, we'll change the system for this one thing.

Jessi: Mm-hmm.

James: We're actually at an advantage for those things 'cause it's an operating terrain.

Mm-hmm. So you want to just keep that in mind when you are, when you're looking at your either property manager or sponsor.

Jessi: There you go.

James: Yeah. Counterintuitive. But there it is. Um. I think that's what I got. Cool. I'd like a final thought, but it's, it's not important. Um, so yeah, so I think, again, those laws are just important and you don't need to know exactly what all of them are, but it's really important you at least understand the broad strokes

Jessi: Yeah.

James: Of what it is that you're investing in.

Jessi: Are there some good resources that you would look into or go to so you don't have to just like read the legal ease of everything.

James: Um, that is a fantastic question. I don't have that resource, so I can't say, just go to me.

Jessi: Hmm.

James: Um, no, I, man, there used to be some really good ones and they've kind of, those websites have all changed hands over time.

Yeah. Uh, honestly, it might be one of those where it makes sense to just head over to chat GPT and put in some of the questions and, and there's actually a search option in there and just say, Hey, I wanna know about. Oregon laws for terminating a tendency, like what does that look like? Mm-hmm. What's the timing?

What are the fees? Yeah. Um, what are some of the state regulations around things and what are my FHA things that I need to look out for?

Jessi: Yeah.

James: That's probably like the best search.

Jessi: Sure

James: thing that you can do. Well,

Jessi: typically. A search like that would give you, it would give you the ORS number. You could go back to Yeah.

The original law and read it

James: well. Yeah. Well, and if you specifically click the, the search thing mm-hmm. It'll include links to all those. Sure. And so I would read the summary and then click through the link. Yeah. Um, to see what it says. But yeah, there used to be, um, oh shoot, what was the name of it? Cozy.

Co, I think back in the day

Jessi: mm-hmm.

James: They had like a Landlordology website. Yeah. They got a, they got bought by apartments or whatever the big one is and it's all gone. They

Jessi: changed it.

James: Um, but they used to have a really nice, like it was one page summary of the main bullet point laws for every single state.

They're like such a brilliant move from an SEO standpoint. I was like, so good. And I suppose if I was smart, I could create like a Oregon law. Again, one page. Yeah. Here's just a great resource for everything that you should know.

Jessi: Mm-hmm.

James: Not a bad idea. I could create that and then, um, just kind of update it as change.

I mean, if people start asking for

Jessi: it, I could see,

James: yeah. I could see that being something that I send to owners.

Jessi: Mm-hmm.

James: Um, just like, Hey, FYI, just so you're aware. Specifically make it for owners of the property manager. Mm-hmm. Where they don't necessarily need to know all the stuff. Right. Even though we provide link, but it's like we can, this is

Jessi: links we're operating under,

James: but Yeah.

Here's kind of the laws.

Jessi: So you're in the know.

James: Yeah. Yeah. Maybe I'm trying to, I have to decide how

Jessi: mm-hmm.

James: Worth my time. It is to do so. Like if there's, if there's demand and need for it, cool. But if not, I'm like,

Jessi: eh, makes sense.

James: Have to talk about it. So, yeah. Good question though. I like it. Well, thanks for listening and learning about some laws and kind of the things to be aware of.

Um, I generally do think it's important and like the underwriting's very important, but I think the legal backdrop is also mm-hmm. Um, just as important for, for you to understand. So hopefully that was helpful and if you are interested in investing with us and kind of jumping through those legal loopholes with us, um, we're happy to do it too.

You can learn more about us at furlo.com. So with that, thanks for listening. Have a great day.