As the war drags on between Portland landlords and city government, delaware statutory trusts are looking more attractive all the time. Quoting Sue Scott, a long-time Portland landlord, “The city is using legislation and the threats of huge penalties, fines and fees to put the housing crisis on the backs of those who provide housing.”
Worse still, this ‘blame the landlord’ mentality is endemic to the West Coast, Seattle-Portland-San Francisco-LA are all the same. State and local governments capriciously lash out at landlords for the housing problems they created themselves with restrictive zoning and the prohibitive development costs this brings in its wake.
In so doing, they have substantively increased the risks to private landlords in their ownership and operation of rental property. Most landlords we have dealt with over the last twenty years or so value quality and continuity of tenants over maximizing an income stream. Therefore, their rents are consistently below market. To further squeeze these already thin margins with more fines, more fees and greater litigation costs will drive them out of business. But this is what radicalized tenant advocates like Margot Black and Chloe Eudaly want.
The supreme irony here is that as a class mom and pop landlords have always been the most accommodating to tenant needs. This will disappear as they are systematically replaced by remote institutional ownership.
Statewide rent control is now a reality. Furthermore, as a landlord you are now prohibited from ending most leases. Your ability to screen tenants will also be proscribed and control over their ‘security deposit’ curtailed. That leaves you with the Delaware statutory trust option.
A Delaware statutory trust’s principal advantage is remote ownership and the investors correspondingly passive role. It completely removes you from day to day operation of the property and incumbent difficulties with tenants and local bureaucracy. Their headaches are no longer your headaches. Additionally, the Delaware statutory trust structure provides a veil to ownership. You as a property owner can no-longer be called out by demagogic public officials. This is a tactic increasing popular with the left and its war on private property.
Blue state governments are deeply committed to stripping landlords of their rights and stacking the deck in the tenant’s favor. However, the great advantage of a Delaware statutory trust is it allows you to push back with corporate muscle at little or no cost to yourself. By joining with other, similarly afflicted property owners you are no longer alone in this fight.
Peregrine Private Capital | Lake Oswego
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This material and views are prepared solely by the author and does not necessarily represent the views of the its affiliates. Statements concerning financial market trends are based on current market trend, which will fluctuate. Projections are inherently limited and should not be relied upon as an indicator of future results. Historical figures and performance are not indicative of future results. This is for informational purposes only and does not constitute an offer to buy or sell any investment.
DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated.
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