I wrote a while back about my trip to the ASD retailer show in Vegas. We followed this up a few weeks later by returning to Vegas, along with Jeff of J & J Rentals, for the National Hardware Show.

We were looking both for new products as well as opportunities to buy items that we currently buy in case and pallet lots. We were not expecting to hit a home run on the latter as, although we purchase $25,000 to $35,000 of hardware, building supplies and paint per month, those number probably were not enough to interest large wholesalers.

We actually hit a home run on both as well as finding products for my wife’s event supply business.  Ironically it turned out my son was at the show too. He left radio and is now working for a public relations firm. They were there helping promote a fertilizer infused grass seed.

Cool new products found at the show

Number one has to be TeleSteps telescopic type 1 250# and 1A 300#  rated ladders with OSHA and ANSI certs. These were originally developed for military and law enforcement use. At the show they had a couple of the flat black anodized military versions on display.

The advantage of these over an extension ladder is they fit in the trunk of your car instead of requiring a truck with a ladder rack. What was happening is we would send a maintenance guy out and if the job required a longer ladder we would have to divert a truck with a ladder rack to deliver and then pick up the ladder.

I purchased one telescopic ladders and sent it out with a crew leader. He came back, said he loved it and asked if he could keep it. I said sure as long as he took good care of it. He said he would treat it as well as he treats his girl. I cautioned him not to bring my ladder back in the same condition as his girl, pregnant.

Now two other crews are requesting their own telescopic ladders.

Next cool item:

SaniSeal wax ring replacement. This is the “donut” that fits between the toilet and the sewer pipe flange. The problem with regular wax rings is if there is any movement they tend to leak causing the floor to rot or water damage to the apartment below. It a heavy person sits on the toilet the wax ring can compress and they do not return to their original form afterwards.

The SaniSeal product is made of polyurethane foam that does not permanently compress and is reusable if a toilet needs to be unmounted for things like drain cleaning.

We have purchased a case of these.

Speaking of drain cleaning:

General Wire was at the show with their sewer and drain cleaning machines. Not too much special there, but they have a new head for both small drain cleaners as well as sewer machines called the ClogChopper. It looks like it could handle roots better than a normal blade. We bought one and will try it the next time we run into roots, which is often as the city in their infinite wisdom tend to plant trees at the curb line right above the sewer.

We also found a couple of new tools for clearing sink drains.  Probably the best of breed is the “DRAIN KING” MINI-SNAKE

Painting:

There is a tremendous amount of time wasted in set up and take down on painting jobs as tThey have to clean their brushes, rollers etc. I’m pretty sure I lose an hour a day per painter. In fact during the summer we run our paint crews ten hours a day four days a week to cut some of this cost, plus the guys like three day weekends.

We ran into a neat product that can cut the set up/tear down cost a bit. The Kovrd 3 IN 1 PAINT TRAY BAG & DROP SHEET is an air proof bag that just zips shut to keep the rollers, trays and brushes fresh. It also works as a mini drop cloth for painting doors etc.

No one in the upper Midwest carries the product, so we bought a case and had it shipped up to Milwaukee.

Water, water everywhere…

Milwaukee sewer and water costs are out of control, but you knew that.

We found some interesting water conservation products. One that may or may not save a lot of money depending on how well it is accepted by the tenant base are flush valves that convert standard toilets to dual flush, using half the water for liquids that solids.

A few seemed like well educated people would have a hard time understanding them and were expensive such as the Toilet Guardian AquaOne.com, but one shows promise.

The One2Flush by One2products.com is relatively inexpensive, in the $25 range in quantities, and appears simple enough that it will not confuse tenants which results in service calls. We are going to do a limited test on a handful of properties to see the results. The valve itself has been used in europe for many years.

In the past we’ve tried the FluidMaster water sentry. This is a fill valve that shuts off when it detects a running toilet. The results were not that encouraging, but it was a few years ago. Korky, has come out with their version of a similar product called WaterWISE™ We ordered a dozen of these for a test.

Faucets

When it comes to faucets you can get cheap plastic faucets that constantly need replacing or you can get metal faucets that last but cost 3-4 times as much.

We found a distributor of good solid metal faucets at the price point of the plastics. These are made for the hotel industry, and weigh enough that you could probably take them to Miller Compressing, a local scrap yard, and get the price back in scrap metal. They have all the listings such as NSF, CSA, etc. and are approved for CA, which has some of the most stringent requirements in the nation.

We located a manufacturer of fire extinguishers and another of CO and smoke detectors. Both seem to offer a good price compared to what we are buying today. We are working out the shipping before placing an order.

Really cool thing

We were at the Frost King booth, you know, the weatherstrip, carpet bar and plastic manufacturer.  The salesman that spoke to us was no other than Mel, the founder and owner.  I like the product and was impressed that a guy of his position still works the floor, talking to even t smallest of buyers.  No wonder they have been so successful for so long.

Final thoughts

We also found a few general suppliers, but I feel those those will be of limited interest to the readers at large.

I’m sure I left out a few important points and will write more later.

AASEW Attorney Heiner Geise had researched this a bit and came to the conclusion it is not quite as bad as originally thought.  He received an opinion consistent with his view from the Leg Council.

The first clarification is items not in the Rules (ATCP 143) cannot cause an owner to pay double damages and attorney fees.

Knowledgeable owners should be able to successfully defend attempts to collect consumer protection damages for items not in 134.  The typical owner would not fair as well unless the courts are educated on this.   Unfortunately the way the bill was written it will be an uphill battle educating Commissioners and Judges on the distinction.

We also must be ever diligent to proposed changes to ATCP 134 as the new language makes it permissible to include other aspects of the statute into new rules.

Heiner was also able to get the Leg Council to concur with his reading of the requirements to disclose code violations.

Read Heiner’s letter to the Leg Council and their reply.

Note that none of this clarification changes the need to modify your leases to comply with Wisconsin’s new landlord tenant law.

Those of us with any significant amount of real estate need to plan better for what will happen if you suddenly die.  Your spouse and kids probably will not enjoy landlording as much as you.  Wait, few people “enjoy” landlording, so let’s use the word tolerate instead.  You need to have a list of people in the industry that you trust. Keep that list handy for your family so they can get their hands on it if they need to.

My other purpose is to acknowledge real estate broker Graig Goldman who pulled off what many thought would be the impossible. He sold over 100 properties at a good price in less than two months.  If you attended the March Apartment Association meeting, Graig was the presenter on buying foreclosures.

 The story of Joe

This past November a friend, Attorney Joe Peters, passed away suddenly.  He left behind a wife, a teenage daughter and … one hundred and some rental houses on the north side of Milwaukee.

His wife initially was going to run the properties as she had experience managing  some properties in the UWM and Bayview areas.  The plan was to sell the north side properties in trickles.

She quickly found out lower income rentals are a different animal.

When a tenant would move out the neighbors would steal the plumbing.  She found the DNS code enforcement inspectors harsh and unreasonable.  But the employees Joe left behind were the final straw.

She called me in December, needing help on the employment taxes.  Joe only had a handful of employees so, sure I’d help her file so she did not have to rush out and choose an accountant or payroll service without the time to research her options.

While I was doing the taxes, she was complaining about how much the workers were costing her.  The numbers she mentioned did not match the labor market nor the tax forms I had just helped fill out.   It seemed the employees all doubled their wage the day Joe died.  She decided she would continue to pay the higher wage until she found another solution.

The workers were not productive, even though they were now making twice the industry norm.  When Joe’s wife pushed them to do an average amount of work, they gave her a demand letter asking for even more money. When she refused they quit.

Between the copper thieves, the city and the workers she had enough and decided to sell.  In the initial process she met a lot of people who claimed to be long time close friend’s of Joe’s.  I asked her if Joe ever mentioned them to her.  Nope, never heard of them.  When she told me their offers, it was clear that they just wanted to be close friends with the equity in Joe’s properties.  Some of the offers were all or nearly all paper.  One offer was seeking owner financing and  18% of the sale price to be held ‘in case the buyer discovered repairs that were necessary’ within something like a year.

The wife was so distraught over the problems associated with lower income rentals that she almost accepted one of these ripoff offers.  I spent many a phone call trying to talk her out of doing so. I also gave her the number of three brokers that I have worked with.  One of them Graig Goldman had liquidated a large number of properties that I was a court appointed receiver for.  He had gotten a good price for them in this down market a year or two ago.

The properties were listed with Graig Goldman on February 21st. Graig got right on it and started generating legitimate clean, cash offers.

The vultures that had been circling her told her things like the offers were fake.  They almost convinced her to accept their lowball offers just to get away from the hassles of running rentals.  Again I pleaded with her  not to throw away everything Joe had worked his entire life for.  She agreed.

By early to mid April Graig had sold all of the properties to something like a dozen owners, all but one for cash and that one went to a church with a sizable downpayment. They closed at double the vultures offered prices. Yes, all sold within less than two months of the listing.

Even though he made a decent commission on the project,  Graig deserves to be acknowledged for far and above average efforts required to pull this off in this time frame and in this market

Now if you see this post as an open door to pitch your Russian oilfield, penny stock, gold futures “opportunities” to her, or to offer your hand in marriage … I hate to disappoint you but I waited to write this until she had already addressed the where to put the money question.

Rental housing markets in major metropolitan areas of the Midwest region are balanced to tight, with rent increases reported in all major markets, continuing a year- long trend of strengthening conditions.

http://www.huduser.org/portal/periodicals/ushmc/winter11/USHMC_4q11_regional.pdf

(The linked document contains rental and housing stats for the entire nation)

http://www.twincities.com/stpaul/ci_20410240/u-s-house-committee-seeking-details-over-st

End of last month my wife and I attended the ASD retail merchant trade show. This trade show is held in March and August in Vegas. They also have one in NYC in September.

As a result of  attending the ASD show are now buying directly from the same sources as many of our suppliers, cutting 35-40% off the distributor price we were paying.  Many of these items we buy by the pallet so savings is huge.  The largest example is curtains used for fabric draping at weddings and events. We sell thousands of these a month.

Cool, but what does this have to do with landlording?

A lot actually.  At the show I found a number of products that we buy in quantity for the properties we own and mange at prices that were surprising.  For example passage sets and deadbolt locks for $3.00 a piece.   These are steel latch ANSI Grade 3, similar to the Defiant or Legacy brands at Menards and Home Depot.  We actually upgraded to the “off brand” a number of years ago when Kwikset changed to a plastic latch in their 200 series that would break and lock tenants in their room.

We found nylon polyester paint brushes with long wooden handles. They look, feel and are packaged, with the exception of the name, the same as what we are buying today at Sherwin Williams at twice the price.  As I am examining a brush the rep walks over and says ‘It’s a very good brush.  We sell that same brush to Sherwin williams by the container.’  (a container is those semi trailer sized boxes that travel by ship and then are loaded onto rail cars and trucks)

When the CO detector law first went into effect I ordered thousands for our use.  The price was to be just under $15 apiece.  I told buddies of mine in the industry who couldn’t believe the price we negotiated.  So I ordered more to cover these needs.  The price dropped for all of us to $13 something apiece. So helping others we in effect helped ourselves. At the ASD show one vendor offered us the same US branded model at $9 a piece in the same quantity as we currently have to order.

At the show quart bottles of brand name cleaning supplies;  60-80¢ each in mixed lots pallet.  Add about 35¢ apiece for shipping and you are still well below the three four bucks you find them for at Pick N Save. We go through cases of these products getting properties ready to rent.  As I reviewed our purchasing over the past year, it looks like we consume the equivalent of a pallet of cleaning supplies every three and a half months.  While we don’t pay four bucks a bottle, we are paying more than two times what we can get it directly from the distributors.

There were a number of other products we buy in bulk that we got pricing on.  It is going to take a while to digest all that I saw and learned.

For the most part these sellers are the direct importer from China. Yes, much of the American branded products are made in Asia. Hate that as you may, it is a reality.    One of our newly found curtain suppliers claimed to be supplying Target.  I walked into target and to my surprise was able to find the same curtain he is selling us on their shelf in the same packaging as the ones we are receiving.  While I know Target gets a better price than us, I doubt that many of our direct competitors do.

Last year we had met with Chinese manufacturers trying to get product at a better price.  That path seems fraught with dangers.  Dealing with US based importers and manufacturer reps is easier.   So far every thing we ordered for  the Event Decorating Academy is arriving in the quality, quantity and condition were anticipated without any odd financial issues.  While eventually going directly to China may save money,  I doubt we would have achieved the same level of satisfaction until we were well seasoned.  That is assuming we did not make mistakes in China that would have left us broke.  They clearly do not subscribe to the same laws as the US.

Cool for you, but why would this interest me?

Some of these things I do not need full pallets of, but maybe some of you in the Milwaukee area could take advantage of the deal and in the process make it reasonable for me to bring in a pallet.  Similar to what we did with CO detectors in the past.

If you want two smoke detectors and a lock this obviously isn’t worth the effort for either of us.  But if you need dozens or hundreds of something maybe there is an opportunity here.  I would  be very interested in hearing what products you buy in bulk and at what price you pay today.  Email me or post to the comments.  I will share what I learn directly with those that respond.

The neatest thing I saw at the ASD show …

There was a young Korean lady selling an air cushion shoe insert.  The insert works by pushing air from the sole to the arch as you walk.  We bought some samples.  My wife  (size 5 shoe) loves them. I like the concept but the size is wrong for my big feet. The arch part isn’t really at my arch so the effect isn’t what it is designed to be.

But what was so cool was there was an older guy in the booth with her that spoke no english.  While we were buying our samples she introduced him as her father, the inventor and patent holder.  She was obviously so proud of her father.  It was very cool to see.

Most interesting thing I saw at the ASD show…

Pallets of returns

You know when you are at the returns desk of Wal Mart, Target etc and see all the stuff that people return.   I assumed returns will be placed back on the shelf.  Actually they package it up and intermediaries sell it for a couple of hundred dollars a pallet.

Read their full analysis

The Act revises certain provisions of landlord-tenant law as follows:

• Allows a landlord to dispose of abandoned property at the landlord’s discretion, except if a landlord does not intend to store personal property left behind by a tenant, the landlord must provide written notice of that intent at the time of entering into, or renewing, the rental agreement. Prescriptions and medical equipment must be kept for seven days. Notice must be provided to the tenant and a known secured party for an abandoned manufactured home, mobile home, and titled vehicle before disposing of that property.
• Allows a landlord to withhold amounts from a security deposit that are reasonably necessary to pay for damages to the property, and for unpaid rent or utilities. A landlord is prohibited from withholding any amount from a security deposit for normal wear and tear, or other damages or losses for which the tenant cannot reasonably be held responsible.
• Requires a landlord to return a security deposit to a tenant within 21 days: after a tenant has vacated the premises on the rental agreement’s termination date; after the landlord learns that the tenant has vacated if after the termination date; after eviction; or, if a tenant has vacated the premises before the termination date, after the rental agreement’s termination date or after a new tenant’s occupancy if that begins before the first tenant’s termination date.
• Requires a landlord to provide disclosure prior to the signing of a rental agreement any uncorrected building code or housing code violations if the landlord has actual knowledge of the violation.
• Requires a landlord to provide at the time of occupancy a standardized check-in sheet for the condition of the premises, to be completed and returned by the tenant within seven days. A check-in sheet is not required for rental of a plot of land that is used for a manufactured home or a mobile home.
• Specifies that certain prohibited provisions of a residential rental agreement render the entire rental agreement void and unenforceable. Also, if any particular provision of a rental agreement is found to be void or unenforceable by a court, or is rendered void or unenforceable by reason of a statute or administrative regulation, the provision is severable from other provisions of the rental agreement that are not affected and that remain valid and enforceable.
• Specifies that damages awarded to a landlord for a tenant who continues to occupy the premises after eviction or beyond the termination date of the rental agreement are mandatory, rather than discretionary.
• Specifies that acceptance of any amount of past due rent by a landlord cannot be the sole basis for dismissal of an eviction action for failure to pay rent.
• Prohibits a city, village, town, or county from imposing a moratorium on eviction actions.
• Specifies that any violation of the statutory chapter on landlords and tenants, including the provisions of the Act, may also constitute unfair methods of competition or unfair trade practices that are enforceable by the Department of Agriculture, Trade and Consumer Protection (DATCP), and by an individual right of action that allows recovery of reasonable attorney’s fees and twice the amount of any pecuniary loss. Regulations by DATCP cannot change any of the rights or duties arising under the statutory chapter on landlords and tenants.

Effective date: Act 143 is effective March 31, 2012. The provisions relating to disposal of abandoned property apply to any property abandoned on or after March 31, 2012, except the required notice of intent not to store abandoned property applies to a rental agreement entered into or renewed on or after March 31, 2012. The provision relating to mandatory damages for failure to vacate applies to an action that is commenced on or after March 31, 2012. The severability of void or unenforceable rental provisions applies to a rental agreement entered into or renewed on or after March 31, 2012.The timing for the return of a security deposit to a tenant who vacates the premises before the termination date of the rental agreement applies to a tenant who vacates the premises on or after March 31, 2012, unless the rental agreement contains a provision that is inconsistent with that procedure, in which case the timing for the return of the security deposit applies upon the renewal of the rental agreement. A prohibited provision that allows a landlord to terminate the tenancy if a crime is committed in or on the rental property renders the entire residential rental agreement void and unenforceable if entered into or renewed on or after March 31, 2012.

One thing the bill does is add a new prohibited lease provision:

704.44 Rental Residential rental agreement that to contains certain provisions is void. (intro.)  Notwithstanding s. 704.02, a residential rental agreement is void and unenforceable if it does any of the following:
…

(9) Allows the landlord to terminate the tenancy of a tenant if a crime  is committed in or on the rental property, even if the tenant could not reasonably have prevented the crime

For those of us with Crime Free provisions in our agreements this appears problematic.  We discussed this with our attorneys and believe the following underlined change to our crime free lease language may meet the new law.  Note:  This is not underlined in the copy given to the tenants.

Our new agreement also limits activity to that which occurs on the property, rather than near the property.   I still think an owner should be able to evict tenants that are disrupting the neighborhood, but behave at home.  We’ll leave that fight for another day.

Our new provision:

USE: Premises may only be used for residential purposes  Operating a business or providing child care for children not listed on this agreement is prohibited.

Tenant may not permit activities at the premises which unreasonably interferes with other tenants or neighbors.  This includes, but is not limited to loud music and loud parties. TENANT SHALL NOT CONDUCT NOR ALLOW OTHERS TO CONDUCT ILLEGAL ACTIVITIES UPON THE PREMISES INCLUDING BUT NOT LIMITED TO THE SALE OF DRUGS.

Tenant, any member of the Tenant’s household, or a guest or other person under the Tenant’s control shall not engage in criminal activity, including drug-related criminal activity, on or near property premises. “Drug-related criminal activity” means the illegal manufacture, sale, distribution, use or possession with intent to manufacture, sell distribute or use a controlled substance (as defined in section 102 of the Controlled Substance Ace (21 U.S.C.812).

Tenant or members of the Tenant’s household, or a guest or other person under the Tenant’s control shall not engage in any act intended to facilitate criminal activity including drug-related criminal activity, regardless of whether the individual engaging in such activity is a member of the household or guest.

Tenant or members of the household will not permit the dwelling unit to be used for, or to facilitate, criminal activity, including drug-related criminal activity, regardless of whether the individual engaging in such activity is a member of the household or a guest.

Tenant or member of the household will not engage in the manufacture, sale, possession or distribution of illegal drugs on property or premises.

Tenant, any member of the Tenant’s household, or a guest or other person under the Tenant’s control, shall not engage in acts of violence or threats of violence, including but not limited to, the unlawful discharge of firearms, on property or premises.

A SINGLE VIOLATION OF THIS SECTION SHALL BE MATERIAL VIOLATION OF THE RENTAL AGREEMENT AND  GOOD CAUSE FOR TERMINATION OF TENANCY  UNLESS THE TENANT COULD NOT REASONABLY HAVE PREVENTED THE CRIME. Unless otherwise provided by law, proof of violation shall not require criminal conviction, but shall be by a preponderance of the evidence.

As you look at the part of your lease that addresses criminal activity I am thinking that adding “… unless the tenant could not reasonably have prevented the crime”  should keep your lease valid, but have not reviewed this in depth with our attorneys.

Now go modify your leases to take advantage of the benefits and to avoid running afoul of the other changes.  That is what we will be working on for the next ten days before a new lease is required.

The changes required that I see so far are:

1. You must put language in your agreement on how you will handle disposal of the junk left behind when a tenant moves
2. If you do not use move in condition report you will be required to do so now. It should probably be named “information check-in sheet” to match the language in the statute
3. If you have a version of the Crime Free Addendum in your lease you must modify it or remove it

There are probably more changes that are required.  I’ll update this as we get more information.

How the new WI Landlord Omnibus bill affects our lease

We already address disposal in our agreement.  The big change for us is our agreement uses a version of the Crime Free lease addendum that is modified to existing WI law.  Because of the Omnibus bill we must remove or change those provisions.

If you are using our (Affordable’s) rental agreement it is imperative that you stop using it for tenancies entered into after March 31st, the proposed effective date of the Omnibus bill.

We will be working on a revised version of our agreement that continues to suggest the tenants should not allow the property to be used for drugs and gangs while complying with this new law.

The changes are required to incorporate the concept of whether the tenant could “reasonably have prevented the crime.”

The revised statutory language reads

704.44 Rental agreement that contains certain provisions is void. (intro.)  Notwithstanding s. 704.02, a rental agreement is void and unenforceable if it does any of the following:

….

704.44 (9) Allows the landlord to terminate the tenancy of a tenant if a crime is committed in or on the rental property, even if the tenant could not reasonably have prevented the crime.

The Wisconsin Legislative Council’s synopsis of the landlord Omnibus bill states

Senate Amendment 1 to the substitute amendment specifies that a provision in a rental agreement that allows a landlord to terminate the tenancy if a crime is committed in or on the rental property, even if the tenant could not reasonably have prevented the crime, is a prohibited provision, and therefore, renders the entire rental agreement void and unenforceable.