Why It’s Hard to Be a Landlord in 2025

Dan Austin: [0:00] There. Welcome back to another episode of the Collecting Keys Real Estate Investing podcast, the podcast where we teach you how to make massive income, not just passive income. It's a Friday episode. So you got me, Dan Austin, as your host. This will be one of our solo episodes. We've been mixing it up quite a bit lately, doing more deal analysis and review, like postmortems on deals that we've done, whether they're good, bad, make a lot of money, make a little bit of money. Really focusing on some of the more complicated stuff too, because those are the fun ones to break down. And honestly, if you can do more complicated deals as a real estate entrepreneur, you're going to always make a little bit more money than the average guys. This will be a little bit of a divergence from that because I'm going to talk more about the passive income side today, and I will caveat that this is going I'm going to talk about even more specific than just the passive income, but the rental landlord tenant laws and laws associated with, honestly, how much money you can make as a landlord. You know, there's different states. We've got the red states. We've got the blue states. The thought is is that red states are better to make income for rental property landlords, owners, and all that sort of stuff. And when I say institutional, I mean, you if you talk to any big fund, they're really targeting those red states because they feel like they can make more money in those states. And the reason why I'm not gonna validate that, but I'm gonna say the reason why is because there's less regulation on the side of the tenant.

Dan Austin: [1:29] You typically have landlord friendly states and tenant friendly states. The blue states tend to be more tenant friendly. Can you make more money in red states or blue states? I don't really know. I own properties in red and blue states. I can make money in both. I think for most of us, it's not as big of a deal to be in a blue state when you're talking about somebody that owns 5,000 units. Someone that owns 5,000 units, they're really trying to reduce their legal risk and their regulatory risk on average, right, over across this. So if they know that they're always going to do 10% evictions every year, and an eviction in a blue state costs $1,000 more than a red state, they're always going to want to go in a red state. So I believe that's the reasoning why at the institutional level, it makes much more sense. Is there more risk even for the little guy in the blue states? Absolutely. I will not argue that there's not. And I'm going to explain some of that because Washington came out with a pile of new landlord laws that I'm not upset about, but I'm just like, really? Come on. We're already getting beat up on the, you know, insurance costs going up, the tax costs going up, rents have been going down for the last twelve months, while labor and materials still stay high because of inflation. So it's been harder. If you're a landlord out there, I feel you, let me know. If you feel the same pain, hit me up on Instagram, investormandan. I would love to know your successes and your losses as a passive investor in real estate right now.

Dan Austin: [2:53] I have a mixed bag, some wins and some losses in our portfolio. And so love to hear what else is going on out there. But anyways, I want to share some of these because they may be coming to a state near you, but also, even if you don't invest in Washington, these are important things to kind of pay attention to when people are coming up into your city councils and your state legislations to talk about these different laws. Washington tends to be one of the more tenant friendly states. Some of these make me laugh because they're just so comical, but a big one is, the change in what we would normally call above normal wear and tear versus ordinary use of an item. So and they have changed that terminology because typically what you'll say is like, oh, it's ordinary wear and tear. It's touch up paint. You know, we're just we're gonna restretch the carpet. You know, we're gonna do these things. You can't really charge in most states for those types of things. That's just normal wear and tear. But that small change in ordinary use. So is it ordinary use for something to fail and break? Maybe. Is it ordinary use for somebody's dog to shit all over your carpet and stain it to where you have to rip it out or you have to pay for cleaning?

Dan Austin: [4:01] I don't know. I wouldn't say so. However, now what you have to do is it's almost like guilty till proven innocent type situation. Now you have to overly produce documentation showing that it was above ordinary use, which is also a squishy term anyways, just like it was before. You can't charge them for carpet cleaning, you can't charge them for the touch up paint, the light bulb, you know, replacements, all that stuff. That you have to basically just eat that unless you can prove that it is above ordinary use, which it's just a pain in the butt, but it'll probably have cut into some people's margins. I think of these situations as the extremes, it is in the event when a tenant fights back, you're gonna have to have that proof. And if you don't have that proof, guess what? You can't charge them and you're probably gonna have some legal fees on both sides. So it's a rare it's gonna be a rare problem for people, but I think that is a general thing kind of going across many, many states is how how we deal with damage deposits and all that sort of stuff. One that really is kind of a pain with this is they have, like, a mandatory documentation. Like, you have to show the tenant the documentation around the work you did and what the costs were. And if you do the work yourself, you have to charge a reasonable rate, which could, again, if it goes to court, be determined unreasonable by a judge. Honestly, if I hire a handyman in Spokane, it's 80 to $100 an hour. So if I do the work myself, can I reasonably charge them 80 to $100 an hour?

Dan Austin: [5:22] I think so. However, a judge might say that is absolutely excessive. And yeah, I feel like it's excessive that I have to pay a handyman that, but guess what? That's what I would pay them. So if I do the work myself, I should be able to charge them, right? The one that really gets me is the, if you have a above a 3% increase in your rent. So say you got a twelve month lease, it increases, you know, you're gonna do a 3% increase or more, you have to give them one hundred and eighty day notice, which basically means you can't even do a six month lease anymore in Washington. It has to be a one year lease at minimum, because you gotta give them six month notice that you're gonna raise their rent 3%, yet they can still give you a twenty day move out notice. So I think that one is a little bit bullshit. I totally understand that families that are renting should have good a fair amount of notice. You shouldn't be one month notice that their rent's gonna increase. And I especially if you're gonna do like a 10 or 15% increase, I think that's just being a shitty person to tenants. So, yeah, you shouldn't do that. However, a six month notice, I mean, come on. They they should at least increase the move out notice on the tenants if they're gonna make you give them six months.

Dan Austin: [6:27] But the funny thing about this one is in Washington state, if it's subsidized tenancies, basically section eight, you can still give them thirty days notice. They don't give a shit because the government pays most of their rent, but they still have to pay a portion. And they're the lowest income people. So say out of a thousand dollars, they're paying 200, and then it goes up to $2.15 for them out of pocket. That's still a lot of money. I mean, that's a big chunk of what they can afford regardless if they're paying the whole rent or not. The one that that that actually pisses me off more so than anything, rest of stuff is like, okay, whatever, we'll work around it, that this is gonna actually drive costs up, is serving notice. So a judge in Washington State threw out of basically an eviction case and said you couldn't evict him because you didn't give him proper notice. Even though the landlord followed the current rules, which are post a fourteen day pay or vacate notice, meaning you if you don't pay us in fourteen days, you have you you have to vacate the property. And then, of course, if they don't vacate, then you go into an eviction. The tenant wasn't home when they knocked on the door to give that notice, so they left the notice on the front door, and they also mailed the notice that same day. So they left a notice on the front door, mailed the notice. That is the law. That is the rule. Yet they still were found that they could not evict the tenant because they didn't give them enough notice.

Dan Austin: [7:36] So now the new law is that you have to give three attempts to deliver the notice on three different days. Basically, you're gonna have to pay somebody to go do that or do it yourself, which is not really cool. And my property manager said they're gonna have to charge us $75, which is honestly a reasonable rate to deliver a notice. So just to tell somebody to pay me, I have to pay $225. That might be the cash flow for that unit for the month just to get that. And then say they pay you. And then say you do that every single month. Now all your cash flow is going to posting notices? This is outrageous. Right? I mean, this is where I would say like, come on, we're just going a little bit too far on these things. I still believe I can make money in my market in a blue state here in Washington. I know people are making money. Costs honestly are going to have to go up. When you add regulation, it goes somewhere, right? And the people investing in real estate expecting a certain level of return, if they don't get that return, they leave, or they increase the cost of their customer, their tenants, to get that same return. So I always think regulation, when it comes to these sorts of things, drives costs up somewhere. It's not all bad, I'm not saying that, but it drives costs up somewhere. And it's usually right down to the tenant. And if landlords decide to leave because they can't increase costs for whatever reason, then there's less rentals, properties in the pool of rentals for these tenants, which drives up rent because there's more demand.

Dan Austin: [9:00] So, stuff to think about. I don't really have, any, like, oh, advice, don't invest here, don't invest here. Like I said in the beginning, of the episode is like, think I there's money to be made in both states. I think at the institutional level, they do argue really well that red states are better because there's less regulation, less legal risk. Does that mean institutional investors aren't investing in blue states? Absolutely not, because we know that that's the case. Because there's a lot of rental properties in New York and in, Washington and Oregon and California, all these states that are really known to be really tenant friendly. And I personally am making money in these states. So just look out as you're starting to see some of these towards the end of the year. Things are gonna get enacted in your local market. Some of these can be city specific or state specific, and they can really determine your return, especially if you're already seeing other costs, going up. Just pay attention to these. Be vocal. Typically, property manager should be letting you know of these changes. If they're not, you should, probably find a new property manager because they're obviously not cut into the most important part of their business.

Dan Austin: [9:57] So, anyways, let me know what you think. Hit me up on Instagram at investor man Dan. Love to hear your feedback on this sort of stuff. If you think I'm stupid for investing in a blue state, let me know. Some days I think the same thing. Anyway, have a great weekend. We'll catch you all next week. See you.