Why I sold my rentals in Portland, Oregon!

Interesting city council decision.

Regardless of your politics, some cities make crazy decisions. Here’s a recent one.

Should Landlords have to pay move out fees?

The situation in the article attached has been escalating over the past several years. Some of you know my Portland “Tenant from Hades” rental story. This article reminded me of this adventure!

I’ve done a lot of rehabs, short sales, lease options, rentals, mobile homes, etc. since 1999.  In 2006, my partner and I had 52 properties under contract of various flavors. Market was getting soft in 2007 so got rid of most of them.

Portland is an interesting city.

It’s a beautiful city. It’s the smallest large city on the West Coast. 26th largest city in the US. Population approx. 2.3 million in the metro area. It is on the Northern border of Oregon. The Columbia river (along which Lewis and Clark traveled to the Pacific Ocean) is between Oregon and Washington. Vancouver, WA where I lived, and now live here again, is right across the river from Portland.

Lots of people live in Vancouver AFTER living in Portland. Taxes are approx 9% cheaper in Washington than Oregon.

Oregon – state income tax vs          Washington – no state income tax
Oregon – NO sales tax vs                 Washington – sales tax
Oregon – property taxes higher vs Washington – lower property taxes
Oregon – rents are higher vs           Washington – rents are lower
There are rumors that people in Washington will actually shop across the river in Portland to save on sales tax. Again, just rumors.

My attorney has written Real Estate Case Law for Oregon. He has said that Portland tenants can easily tell landlords “pay me now or pay me later”. The Multnomah County (Portland) courts are extremely tenant friendly.

The tenant mentioned here, bragged one time that he had been to a class on, (get this) “How to Control Your Landlord!” Basically, $25 and we’ll show you how you too can get free rent. Wow!

My grandparents and parents always taught me to be responsible. I know things have been shifting over the past 30 or so years. Don’t have to like it.

Remember the character named ‘2 Face’ in Batman? He got injured and it damaged him physically and mentally. If you looked at one side, he looked normal and the other side… not so nice. He had some serious mood swings, too. Kind of like Dr. Jekyll and Mr. Hyde.

This tenant was like that. Great to get along with, when I was doing what he wanted. But turned on me when he didn’t get his way.

What’s my deal?

How and why I allowed this tenant to move in? Didn’t I know better?

I had the property on a least option, which has an expiration date. Exercise the option by x date or they would have to move.

I was living in Boise, ID for a few years so the property was hard to manage from 350 miles away. The lease option person decided to move so I needed to fill the property again. A friend of mine, was a property manager (PM) so I hired him to manage it for me. PM had business in both Oregon and Washington.

Since I wasn’t there I figured we’d go with a renter to see how things would go. Toxic error. PM screened tenants like most PMs and allowed this tenant and his family to move in.

Because of the tenant friendly environment in Portland, my PM friend decided to close his business in Oregon. Decided to work exclusively in Washington where there was a more landlord friendly environment. So he returned control of managing to me.

The PM had a website which allowed tenants to pay the rent online. I didn’t have that kind of setup. So I asked that he mail me a check. He didn’t want to do that. “I’ve been paying online and will continue to pay online.”

Really? So, I instructed him to pay online thru his bank to mail me a check.

1st month – got a check from the bank in the mail.
2nd month – got an email from the bank telling me to login online myself and authorize the transfer.
3rd month – no check or email by the 8th. Rent is late at close of business on the 5th.

So, I called the tenant to inform him that the rent was late. PM had said tenant was a bit of a hot head. So, I said Hi. Not sure if there is any problem at the bank but I haven’t received the rent for the month. And today’s the 8th. Due by end of business on the 5th at the latest.

Mr. Hyde or 2 Face came out immediately and told me it was MY F*ING problem. He had paid thru the bank and if the bank hadn’t sent it, it’s not his problem. Take it up with the bank!! And hung up on me.

Really?

So, I called back. He answered, and said he happened to be fishing with his attorney, put me on speaker phone and asked the atty if I was harassing him. ‘Attorney’ said yes you need to stop harassing my client.

Now I’ve played golf with attorneys, doctors, etc. They ‘tend’ to run with a more affluent crowd.

Just to clarify, there’s nothing wrong with renters! But if I am renting a 900 sq ft house in Portland, do you think I’d be playing golf with my attorney?? Just sayin’!

So, Mr. Hyde, the tenant,  decided to call the city and file a complaint that I was a slumlord and renting an unsafe house to the public. Part of the class he took I assume.

The city came out and did a rental inspection. Found 13 ‘violations’ that needed to be fixed immediately. When I went back to review the infractions the tenant was laughing that I should have been nicer and wouldn’t have had these problems.

Items included:
Lower cabinets doors needed to be put back on. (His kids had knocked them off)
Carpet under the breakfast bar needed to be repaired. (His dog had torn up the carpet under the breakfast bar)
Carpet was badly stained and needed to be cleaned or replaced. (Carpet was new when he moved in)
You get the point?

HOWEVER, the city inspector also found that the family room that was added on had not been permitted.

What does that mean?

The people we bought the house from, at some point, had added the family room onto the existing house. Never pulled permits. I bought it in 2004, height of the market boom, intending to rehab it. Got an inspection but not permit check. Dumb!

Did the rehab but the work didn’t require permits so never discovered the oversight.

So now the city says I must bring it up to code. Only have so much time and a $550/month fine starts.

Now Mr. Hyde is in full swing. Won’t let me in when contractors come out to do bids. Won’t let contractors come in during the day while he’s at work. They must come at night.

How many contractors do you know who will come out at night?

FINALLY got bids. Got blueprints of changes to submit to city. City has several changes that need to be done since the codes are much stricter than when the room was added on.

Total cost is going to be $25k. Yikes!

Sidebar – The house was 900 square feet. 2 bedroom / 1 bath, family room and 1 car garage. Worth about $175k if it’s in good shape. With the tenant’s complaints, it needed some work. $2-$3k max.

Mr. Hyde’s attorney called. Sounded much different than his ‘attorney’ who he was fishing with several months back.

Mr. attorney says that he can make the complaint ‘go away’ if I will sell the house to his client. He will offer to ‘buy’ it for $75k, no down and I carry the loan.

Now…. I’ve found some incredible deals along the real estate trail. None this good though.

I could hardly contain myself. I told the attorney that although it was a very tempting offer, I might have to pass.

I also mentioned something about blackmail and extortion.

So how did I resolve this mess?

18 months of fighting this guy. $550/mo fine for a year. Rent was $1100 so half went to fines. My attorney suggested that due to the ‘extremely restrictive times, during which contractors could enter the home’, the tenant and family would not be able to live in the house while the family room work was being done.

Tenant outfoxed himself

Mr. Hyde really got upset now. Accused me of having it out for him, etc. Racist. I’m Hispanic (Portuguese) and he’s white. Hello!

I was curious if I was supposed to be his best friend after all the games and expense.

His attorney wanted us to pay for his move and hotel stay while he found another place. NO!

Well, reading the article above they finally got it in.

Anyway, we decided to tear off the room rather than pay to upgrade to code. Got it resolved and it got sold to get the heck out of being a landlord in Portland, OR.

Darnedest thing. For 6 months he kept having potential landlords call for a reference. I told them I couldn’t give a reference. So he wasn’t able to rent. Guess that $25 class forgot to tell him that being a bad tenant can follow you around.

His attorney called and asked me to allow him to rent. He was living at his father in laws place and they wanted him out. I was going to ask the attorney how that was my problem. But said I’d back off. I asked a partner to be a reference point. So I would refer calls to him and he’d refer them to me. Eventually, Mr Hyde found a place that allowed him to move in. Good luck!

NOW, to clarify there are awesome tenants. And I’ve had a bunch of those too. This is just my horror story of a rental.

Good luck to landlords in Portland, OR!