New 2024 Colorado Landlord Laws

 

00:00 – 00:12: Bumper

00:12 – 01:59: Spotlight: Annemarie Sunde

01:59 – 03:08: Annemarie’s Rules for to Protect Landlords

03:08 – 07:17: Intro to the Show

07:17 – 10:55: Pets

10:55 – 11:30: Leases that Predate the Updated Law

11:30 – 14:15: Screening Tenants

14:15 – 17:13: Eviction

17:13 – 20:00: Registering Properties as a Landlord

20:00 – 21:57: Is Your Property Working for You?

21:57 – 25:56: Radon Bill and Why Bills Happen

25:56 – 30:48: Who Would Want to Be a Landlord Nowadays?

30:48 – 32:31: Graduating to Truly Passive Income

32:31 – End: Disclosures

Show Transcript:

So my guest this week is Annemarie Sunde. Annemarie, you’re a realtor, you’re an experienced property manager, you are you’ve witnessed before the the legislature. So you’ve got a quite a background. Can you tell me a little bit about how you got into real estate?

Yeah, I married for ten years and Jeff is been in real estate for 22 and convinced me, no, he didn’t. We had an opportunity to be in property management. State of Colorado requires licensed property management. You’re a realtor. And so we opened a property management company and served many of our owners for just shy of eight years.

Okay.

And I was very active in the legislation, mainly because I was a landlord as well.

So one of the distinctions you make, I think is very good. It’s that you don’t look at it as property management. You know, how do you how do you look at it?

I look at it as asset advising or management. And the differentiation really is owners coming to us saying, I don’t want to fix this. I’m tired of this. And so it’s really understanding what is their goals? Are they not wanting to be a landlord more? Well, maybe we should do something different. We send them over to you, you know, talk about strategies on what they could do with that asset.

Perhaps it’s upgrading the asset. They’ve got an older home. They’re tired of fixing doing those things. Perhaps it’s selling and upgrading to a newer asset, higher rents, those types of things. So we really looked at just more than the house.

Okay. Well, it kind of dovetails with our approach, which is purpose, planning and portfolio. So you really need to find out what is their purpose. I know some of our early conversations you were telling me some of the rules that you had, which we don’t need to get in the specifics, but it was designed to keep people from getting in over their heads.

So some of the rules were designed to protect people and to be able to say, don’t get into a property where you’re having to pump money into it. Don’t get into a property that’s under water and get into a property if you can’t afford to replace something. So I thought those were good guidance just in general to protect the landlord’s cash flow

Yes, that’s our I don’t care. You know, everybody has a model of what they need to cashflow or what they should be cash flowing. Some are 200 bucks. Yeah, some it’s 500 or more. The point is to always be in the positive and not making the house the slave and this miserable thing. Because if we as property manager are going to come to you as an owner and you’re underwater and you need to repair a water heater, the first response is going to be “I don’t want to.”

Yeah, yeah. That’s not a good thing when you have that water.

Well, and we always like to say, regardless of what the asset is, the asset should be working for you, not you working for the asset. So our show today, I really want to get into whether it’s a good time to be a landlord or not. What’s going on? You’ve seen so much. I know we have clients in 34 states right now and we’re there’s a constant drumbeat about this used to be a lot better.

It used to be more fun. I used to make more money. I used to have more freedom. And I think a lot of that has to do with the rental stock in the country. That’s the condos, apartments, multifamily, single families where people live. And so less than ever in spite of what you see in the media, it’s not big, bad corporate entities who are owning it all.

Still, more than 60% of the rental stock in the country is owned by mom and Pop, and it was never designed that they were going to for many of them to set out to try to get 50 units or 100 units or something like that. It’s they kept their first house, they liked it and they rented it and then they kept their next house.

And before you know it, they’ve got a a small portfolio. That’s who owns the rental stock in our country. It’s getting harder and harder for them now.

True. I would venture to go back and say when you said it, it used to be easier to paraphrase what you said. I would venture to say that those people are probably self managing.

Mm hmm.

It probably was. I had a father that self-managed. Yeah. When you’re trying to navigate a tricky legislation in whatever state you’re in, I own in more than one state outside of Colorado, understanding the laws that you are allowed to work within is super important. Most owners, especially if they’re multistate owners, aren’t going to take the time to learn the different legislation laws, and so then they get themselves into a bit of a pickle.

And now it’s no longer fun or easy. Yeah.

And the laws can have some real teeth to them. They can be very punitive. Mm hmm. And I think the assumption there is that the the poor tenant who has to defend themself against the big, bad landlord, but the big, bad landlord, that was my point, is that it’s usually just folks, folks are owning them and folks don’t know how to navigate what’s what’s coming down the pike.

Yeah. And I mean, if you want to talk about the state of Colorado, they’ve made it very easy for a tenant to go against the big, bad landlord. Yeah, they have laws or so preference towards the tenant that the landlord is the one that’s having to do their due diligence. And it has been that way for quite a long time.

It’s up to the landlord to prove the tenant is in the wrong.

Do you remember a movie some years ago, maybe 15 years ago, that where somebody had a property and they had somebody move in and they couldn’t get rid of them? I I’m trying to remember the name.

Right.

Pardon me?

Pacific Heights could.

Be Pacific Ice. I know. That was very scary. Well, let’s talk about Colorado in specific. But, you know, California used to be the most progressive state, I think, of the country. And because of that large population, what happened in California, whether it was emission controls or automobile standards, so many things, they would then start in California and they sweep across the country.

Surprisingly, Colorado is kind of at the cutting edge now, too. And, you know, not to be political about it, we’re just talking about the reality of the laws in force and what do landlords have to do? How do you navigate them? But we’ve seen California, we’ve seen Washington, Oregon, so many states. But let’s let’s focus on Colorado kind of as a as an example, because all the states are doing the same things.

So what are some of the biggest things? I know 2023 was a big year with with law changes here. What are some of them that come to mind?

I would say probably the the 2023 law for Colorado. One of the things they did an eviction bill. They also did a bill with regard to pets. And let’s just focus on pets for a minute. And I started to create a class on Unleash Your Pet because I could spend an hour in one of my classes that I taught just talking about the difference between an emotional support animal and an animal and a service animal and why they have rights, which they do.

They’re highly protected within a living situation. So Colorado, in its infinite wisdom, decided that pets were now a quote unquote, to some degree pet excuse me, service animals are a protected class. So now they’ve actually taking it, taken that service animal over to a pet standard or a pet category pet being Fido, your doggy. And now that is a limited on the security deposit that you can charge as well as the pet rent.

And there’s no longer a nonrefundable pet fee.

Mm hmm. But you said that the Colorado law, there’s never been a nonrefundable deposit, right? deposit.

Yeah, I was just going to say, I see time and time again reviewing leases of nonrefundable deposits. There’s never been that’s never been a thing in the state of Colorado.

Never been legal.

Never been legal. Right. So if it’s called a deposit and this is fees and deposits people seem to use interchangeably, they’re really different. Deposits are always refundable, whether it’s a security deposit, a pet deposit that’s going to be a refundable deposit. And you need you can stand up for that if it’s a fee and it says nonrefundable fee, that’s money you’re paying to the property manager or the excuse me, landlord.

And that is that is gone. That is not your money anymore. And then there’s pet rent and they have capped that at $35 a month or one and a half percent of the monthly rent, whichever is greater.

Okay.

I used to charge 25 per pet.

And is that per pet, Is there a limit on them?

You know, it’s interesting. That’s the beauty of why the way they write these little bills, it doesn’t say per pet. So in my you know, you can go ahead and charge it if you’re called on the carpet about it or someone wants to, you know, challenge you on it. That therein is where the courts would probably get involved if you took it that far.

And then they’re going to have to amend the bill.

So I know you’re not an insurance expert, but there are some breeds that are red lined in insurance policies. How would that affect whether you can whether somebody wants to become a tenant and they’ve got a I don’t want to say I don’t believe they’re bad breeds myself. I think it’s bad owners. But let’s say you have one of those breeds that’s dangerous.

Well, the bill addresses it. And and it’s very shocking to me that a legislation is going to tell an insurance company that they cannot discriminate, discriminate against a breed. Yeah, I you know, HOA is in on many of these, too. No aggressive breeds so that’ll be interesting on how that plays out because if a homeowner has an insurance policy that tells me that if this insurance policy says, hey, no, this aggressive breed, what they have to do is find new insurance, that’s pretty challenging and in our world today.

Yeah. So that’ll be interesting how that plays out. I found that they don’t really think these bills through.

So there are a few things that need to be tweaked and tuned.

Yeah, I don’t know. I don’t know how that’s going to work.

Well, and one thing we were thinking talking about last week is the idea of this law comes out of the law has been changed. What about leases that are already in force? What about leases that were signed before January 1st of 2024?

Yeah, they’re going to stand on that. Well, that was before it all happened on January 1st. All right. So the next time around, we’ll catch you. And on a new updated lease. I kind of understand that I did the same thing. Yeah, but always had a legal review every fall after the session to ensure that new leases were compliant.

So in general, it seems like tenants rights are getting more and more and more and landlord rights are getting fewer and fewer.

Correct? Correct. All the way down to the screening. I think it’s interesting, though, how people’s hands are tied. Landlords and property managers on how they can screen a tenant.

Now, talk about that a little bit. What what is what was the process and what now is acceptable process?

Well, what what what it was was credit criminal and eviction history. Mm hmm. Then they stipulated there was certain amount of years going back that you could look at credit, a certain amount of years going back, that you could look at criminal with some few caveats to that. Then it was, you know, they’ve never ever or yet they have not said, oh, you can’t look at an eviction history.

If they have an eviction and you have a policy that says no evictions, you can deny that tenant still. And I should make a point. Anyone screening anyone should have it very clear, if you’re a property managers should be very clear on their website. If you’re a private owner, you should make it very clear. I would put it in writing of what the bar is that you’re measuring these people to, so that if they ever came back to say that you were discriminatory, they they were well informed before you saw their background.

Yeah, I think now there is a caveat. So in California, you can’t look at income. You can’t look at income and you can’t look at criminal. In Colorado, we can still look at criminal a certain amount of years. In income – You cannot deny someone if they’re on subsidized housing.

Income as far as can’t look at income, you can you ask somebody, how much do you make?

Yeah, they’re going to put employment history. Okay. They’re going to submit.

But you can’t have them verify it. You can’t have them.

You can like they can put in a W-2. They can put in. You know, most people are still submitting that. If you get someone that is applying for a home that is on subsidized housing and you don’t want a subsidized house, you don’t want a Section eight tenant that is not the reason you can deny.

Okay.

Now, if they’re on subsidized housing, they’re likely have poor credit. But if you have a credit score of, hey, my minimum is 650, then I believe you could still deny based on credit score.

Okay.

You couldn’t do that in California.

Okay.

Interesting the way I understand it.

So as far as the law sits right now and in Colorado, what does it take if you want to evict somebody, let’s say basic, they haven’t paid their rent yet.

What’s the process?

That is the blessing that I have had evicted so few people because we did a really good job at screening. Eviction is no fun. It’s not a party for anyone, and it’s a long process now. And Colorado now is a ten day post.

Okay.

It used to be three. So you that you don’t pay rent. I can post notice on you and give you three days to cure or I’m starting the eviction process now. It’s a ten day process. So I post and you get ten days to cure and then we can start the eviction process. There’s also a whole thing of late rent.

Hmm.

So describe the eviction process. Is that a lengthy process.

As it is now, where you could get a process, probably a tenant out on a three day notice in about 45 days is probably taking 60. Based on courts.

Okay.

So you’re going to be two months without rent and then who knows what the house looks like? You know, I mean, not everybody trashes a house, but if you’re on a lower, you know, lower end rent, it’s possible.

Well, I’ve had clients who’ve called, said, I’m done, we’re going to get out. And, you know, part of what we do is we provide a pathway for people who have properties that they’ve owned for a while and they think they’re trapped because of the capital gains. They don’t want to sell or pay the taxes, and they don’t know that there are options.

There’s a wonderful options for people to be able to in a very uniform manner, to say, I’m done, I’ve got this one property or ten. We have a fellow with 101 doors who did not know that he had the options and he’s spending seven days a week. Okay. He’s early 60s. Seven days a week. He is taking care of properties for his family – managing them himself.

And he’s recently started using some property management. But I asked him, I said, ten years from now, are you still going to be owning properties? And it was absolutely not. But he doesn’t know. He didn’t know what the path was. So anyway, there are a lot of options as part of what we well, what we specialize in is helping people, you know, rescue the landlord, really, you know, and especially with the laws changing the way they are.

But let’s say you can’t you’re limited as far as your screening, as far as checking on evictions. So in California, if you went in and you told somebody, I make enough money, this is what I make and I want to rent your place, you can’t deny me. And then once they’re in, I’m not going to pay my rent.

Now, you can’t evict me. I mean.

You know, there’s no there’s not enough money right now for me to manage in California or own a rental.

But it’s scary. Somebody could just skip from place to place to place and. And never pay. Mm hmm.

And it’s all in the in the name of affordable housing, which is a lot of what our legislation in Colorado started getting on that bandwagon of affordable housing. Thus the reason of Denver proper and county all have registered. You have to have your property registered if you don’t, there’s going to be an issue.

So explain that. Surely if you’re just mom and pop and you just have one little condo or one little rental, you wouldn’t have to register that right?

Yeah you would.

How come? What are they checking?

Well, I don’t know what they’re checking. I, I have done one registration for one owner. And it’s interesting the questions that they ask. It’s not even related to the property. So I think it’s gathering demographics. It’s gathering all kinds of information. Again, legislators have this thought that we talked about it at the start that landlords are big monstrosity companies.

Sure. Sure.

And they’re just out to make a boatload of money. So these these bills that are being passed are really to attack those. And I’m well, they said, see that. Yeah. And the majority I see that in our apartment complexes. Oh sure. And those sites things, I don’t see that in single family homes dwellings, maybe a condo, one off here and there.

Those are owners like you said, that started and they just kept adding to their portfolio. I am in the same boat as that. I have four. So I, I think it was trying to educate these legislators and these legislators on building legislation that makes sense. So I was very fortunate to try to participate in that, that you can’t you can’t have a one bill that just knocks us all down.

Sure. Yeah.

And fortunately, they did get some. We defeated a lot. Mm hmm.

Well, and again, some of the. Sure you want people to be safe. You don’t want there to be a slumlord that has. I grew up outside of Chicago, a little town called Naperville, and there were the projects back in the sixties and seventies. And the projects were not nice places. Very, very dangerous. They weren’t maintained. And so, of course, that’s perhaps where a legislature can step in to to truly protect people.

But when it comes to the the majority of our clients are individual landlords who own single families, condos, maybe a duplex or maybe a four plex, but they’re not large apartment complexes by any means. And yet they’re falling under the same very costly, onerous regulations and registrations. And you know, part of our process is to analyze someone’s portfolio and say, what is your actual after tax return on equity?

You’ve got an asset. How much are you making off of it? Which could you make more if it was just sitting down at the bank in a CD or. Obviously we have many options that are better than that, but but most folks don’t know. They look at the rent that they’re getting and look at that as their income before taking out all of these other expenses.

All the other expenses.

My dad that did the exact same thing.

Yeah, yeah.

Yeah. And and honestly, with the gentleman that owns 101 properties. I think I think the other question is what what is your lifestyle like when you’re managing 101? I had property managers working for me and I didn’t allow them to manage more than 50 of them. My best one managed 55 because she had to have a life. So I don’t know who wants to manage 100 when property managers tell me, Oh, I have 100 my portfolio.

That is not something I think is bragging rights. Yeah. So what I say to them is, See, you never turn your phone off. Mm hmm. And when do you sleep?

Well, and we have one of our clients had a property He was actually on on a trip. I think it was Italy, maybe Tuscany. And he actually cut his trip short. It was this long trip that he and his wife had planned for forever because they had a major problem. It was a water heater and a water leak, and they couldn’t enjoy themselves because they’re sitting there managing their property.

They didn’t have any B-team. They didn’t have anybody to go in to to help them out. So again, who’s working for whom?

That happens so much more often than people either are willing to admit or be recognized. And it’s it’s not necessary. Yeah. Yeah. That’s not something working for you.

The let’s see, what were some of the other 2023 changes? I think one of them talked about, curiously enough, talk about radon. What do you know about radon?

I just I think it’s interesting because radon has always been a disclosed a disclosure in a real estate transaction. Mm hmm. Never really a disclosure per say in the property management world, although we we could use the disclosure that the state provides probably less than 5% of tenants ever asked about it, especially because when I managed properties or had the company so much of what the people that we managed were coming from out of state.

Mm hmm. So they really didn’t know. Radon, Colorado, those were. That’s the thing. So they didn’t really know to ask. But of course, doing due diligence as a property manager, ensuring that either there was a radon system or a disclosure was signed with your owner, I feel should have been responsibility by the property management company. Mm hmm. So apparently because we get these beautiful laws or bills, because somebody didn’t do it.

Right. Right. Or somebody’s got it’s a toxic chemical and somebody must have didn’t mitigate or didn’t do something. Tenant probably got sick. No different than maybe not No different, but similar. If you don’t address mold, someone’s probably going to get sick at some point. So there’s ways to handle it. Right. And shame on the owner or the blame the property manager that didn’t address that appropriately.

So now you get a bill.

There’s an interesting corollary to that with qualified money, IRA money. There used to be that if you had one Ira, Ira, you could pull the money out and then go put it into something else and pretty much be in control of your own retirement funds. There was a fellow, I think he was a doctor, and he because it was called the 60 day rule.

And so you could pull money out, put it in your own bank account as long as within 60 days you invested it, rolled it into another IRA, then that was fine. So what he did was he sequentially rolled from one to another to another to another, effectively giving himself access to all of his IRA money without paying taxes on it.

Oh, well, that messed it up for the whole industry, for everybody in the country who then the the government came in and said, okay, you can do one 60 day rollover once per year. That’s it. And there are many occasions where people have legitimate, justified reason for doing more frequently or doing several of them. But you’re absolutely right. It’s one person pushes the envelope too far, takes advantage of it, games the system and messes it up for everybody.

Yes. I think of I think it was 2018 when the law, the bill that came across on application fees for property. Mm hmm. I mean, we never made money on that charge. 45 bucks. Mm hmm. But the bill is in place now in the state of Colorado because probably somebody charged some astronomical amount, like $500. And on the other side, the tenant paid the $500 and that owner pocketed money.

Right. So now the bill states you have to itemize to the tenant. What that in our case, $45 was being used for.

So background.

Checks and if there’s anything.

Extra.

It’s refunded to the tenant. There is no making money on an application fee. And if you are you can easily be reported.

Yeah.

And so so the took one person.

Some of the fines are considerable. I mean. Oh yeah a thousand bucks a pop for doing something and I think a number of them are fairly easy to trip over unintentionally. Yeah. So, about five or 6 minutes left today – I’d love to have you back. Oh, this is. Well, we’ll take them state by state and see what’s going on.

Okay.

We’ll go to Kentucky next.

Who would who would want to be a landlord now, ideally, and who wouldn’t? I mean, we have a lot of young people in our office who, you know, think about building up real estate wealth. It’s one of the greatest ways to build wealth. Of course.

I mean, that’s how my husband and I have done it. I think it’s a great way to build your net worth. Mm hmm. I think it’s strategically approaching. I’m having a conversation with my nephew right now because he’s in the old my dad’s school of thought. You need 20% down. No, you don’t. As a first time homebuyer, why would you do that?

Especially in a market like Denver? He happens to be in Austin, another very hot housing market where if you put 5% down, probably in a year for sure, two, it’s got enough equity where you can get rid of your PMI and you didn’t outlay all of your cash and maybe a lot of young people don’t have it. So I think if you excuse me, let me finish that thought.

If they buy, it also allows you put 5% down. It also allows you to add into your portfolio. And now you’re starting to get that generational wealth. I think the people that I have seen are the older people that are just tired. Mm hmm. That was my dad. You know, he managed that 40 years of a building and, you know, not taking into account all the time it was a hobby.

Yeah.

Not taking into account all the expenses because he co-mingled his own little funds. But it starts to tear to wear and tear on that person.

But let’s go back to the younger folks like your nephew. If he likes to go hunting and fishing every weekend, I don’t know what his interests are. Should he pretty much plan on a lifestyle change if he’s now got properties it needs to take care of?

Oh, I think everyone should have a property manager.

Okay.

I don’t if you’re going to have more honestly, if you don’t have one rental, but if you’re going to have more than one rental, why would you want to buy? Why would you? The intent is I’m going to buy a property, have it work for me. I’m not going to be at work, but it’s going to pay me.

That would be my reason for owning.

Properties back in the Chicago area. What we did was back in the seventies, it was so many seminars and we didn’t have webinars, we didn’t have cell phones, didn’t have the Internet. So you’d get something in the mail, you’d go to a ballroom at a hotel, and you’ve learned about using OPM, you know, other people’s money to to buy it and model out how the cash flows are going to work on it.

And gosh, this depreciation is going to make us a lot of money. And even better, this is where I came in as a 16 year old kid was now you can refurb these, now you buy the old Victorian home and turn it into a duplex and you can steam off 100 years worth of painted wall paper stacked up on top of each other.

Mm hmm. I think that is I would look at that certainly as a way to build wealth, but it’s a second job. So I would want to ask somebody looking to do that because they’ve got their their normal job, then say, okay, if this is good, do you want to have a second job? Oh, no, no, no, no.

I don’t want that. I’m just going to have some investments. But at some point it absolutely becomes a job and it’s controlling you and it’s and it’s really the tail wagging the dog.

It is. I mean, you know, I don’t know a lot of property management companies that were like ours. We had houses that needed to be rehabbed and we would do that for them. I mean, not me personally anymore. I mean, I did do five flips back in the day, but we would hire a contractor and do that flip form and supervise them.

Look, 80% of my owners didn’t live in the state of Colorado. They didn’t even know what was happening on that house. But we communicated so well. We we were their eyes and their ears on that on the ground, boots on the ground. That’s what a good property manager should be doing for you. And you get what you pay for.

I’m going to say it right now. I wasn’t the cheapest in town, but I was darn worth it. And you were accessible and your team was successful and and we were interchanged. So if I went on vacation, there was always someone else that could pick up where I was. Not when I was not there. And and I think that’s healthy in a property management company. Those are all questions that you should be asking when interviewing a property management company. But if you’re going to venture, you know, I’ve seen too many people get a property, get an asset and it’s going to become their rental.

They have one bad experience and they’re out. Hmm. That’s unfortunate. Yeah, because they they didn’t do it right.

So I think the the other part that I want to ask you about and we’ve got like a minute and a half left is the you said a lot of a lot of your previous clients were kind of like ready to get out or they didn’t even know they’re ready to get out. What advice would you give them in 60 seconds as far as there is another way?

Well, I mean, I, I feel the best solution is to to avoid the capital gains to 1031 into an investment that’s still going to pay them. And you guys, at Ridgegate have really have a great portfolio of DSTs and whatnot that we we have rolled my father’s property and I have rolled into. And it’s a great solution for a retiring couple that’s living off the rent.

That’s the best solution. You’re never going to have the nonsense of tenants, renewals, maintenance, nothing.

So really, graduate into passive income. Yes. And where the property and generally we see an increase in their net after tax income that they have from that. So we’re happy to obviously to talk to people and shepherd them through that and just tell them what it looks like. We’ve got an analysis that we that we do for that. So with having to register properties with fewer rights for the landlord, with limitations on evicting, on crediting, on scraping, on screening people, it seems like the tide is really shifting away from the individual having control of their asset.

Yeah.

So yeah.

Annemarie Sunde, thank you for coming in. And we’ll do this again.

Absolutely.

Impact 1031™ is a DBA of Ridgegate Financial, LLC.

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Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication. Investment advisory services offered through AE Wealth Management (AEWM).

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Disclosures:

© 2024 Ridgegate Financial. All Rights Reserved.

“Purpose. Planning. Portfolio.®” is a registered trademark of Ridgegate Financial in the United States.

Impact 1031™ is a DBA of Ridgegate Financial, LLC.

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing.

Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication. Investment advisory services offered through AE Wealth Management (AEWM).

Emerson Equity, Ridgegate Financial LLC and AEWM are not affiliated entities.