GOVERNMENT AS FRIEND

SOMETIMES WE NEED TO LISTEN

As a real estate investor, government can be your best friend!

WHAT!!!

Sometimes as real estate investors we get so caught up in wanting what we want, and wanting

it immediately with minimal cost, that we fail to consider that maybe there is a rational other

side of the argument.

And when we take the time to slow down just a little and listen to other voices, the benefits of

cooperating with government may well enhance the success of your investment.

Today, an ode to government from the eyes of a multi-decade real estate investor.

NOT ALL GOVERNMENT IS CREATED EQUAL

1. Municipal Government – Real estate is impacted most directly by local government.

Taxes, fees, land use approvals, construction inspections, easements, access…it goes on

and on.

I learned when we bought an apartment complex for United Dominion Realty in

Maryland, that local government can also use a hammer from the tool box of other

government entities to nail down their position. There the housing authority approval of

substitution of borrower on a federal low-income loan – typically automatic for a multi-

billion-dollar NYSE REIT - lead to an “offer we could not refuse” to upgrade the property

beyond the rental market.

2. State Government – The General Assembly controls the powers granted to municipal

government (if not granted, local government doesn’t have it). Most states impact real

estate with environmental and housing regulations, generally with limited ability to

enforce (leaving much of the dirty work to local government). There are some tax

benefits granted on the state level, but generally not sufficient to move the needle on

real estate investor decisions. We will talk more about state tax policy conforming with

the new tax code in a subsequent article.

3. Federal Government – Tax policy coming out of Washington DC is traditionally social

policy for the rich! Qualified Opportunity Zone Funds will benefit those with capital

gains to shelter. Real Estate Investment Trust do not get taxed as the corporate level, so

that the masses (of those with money) can participate in a diversified portfolio of real

estate, similar in concept to a mutual fund investment in a diversified portfolio of stocks.

HOW TO GET MAXIMUM ADVANTAGE

1. WIIIFY? Start every approach to government, at any level, with a consideration of “what

is in it for you”. By you, I mean that level of government, the appropriate elected and

appointed officials, the department you are approaching, and the individual with whom

you will meet. Often there is multiple versions of the answer. It may not be that any of

them dislike you (even if you ARE dislikeable!).

2. LEMMINGS. Do your research to find something which was done in that municipality in

the near past that is most similar to what you are proposing. It difficult for a

government to legally deny that which is proposed when some similar was already

approved before. As important, issues are often substantially better understood by both

sides when they are communicated in context of something which already exists.

3. PROMISES. Search for something in your proposal which supports something the

officials (elected or appointed) have previously publicly endorsed. Be creative;

sometimes a pig can be made to look like a cow with the liberal use of lipstick!

4. COMMUNITY. From my years as an attorney in county government, and then as an

elected member of the General Assembly, we sometimes in government get caught up

in the heat of the current crisis and lose our way as to the overall direction. Garner

community support (or at least neutralizing organized opposition) and government

officials will more clearly see a pathway to your proposal.

5. MEDIA. Involve the press (and TV / radio / online) as a “nuclear option” working with

government. Properly educated, media attention can generate an electric energy to

move the community and government officials in your direction. Lose control – which

often happens - as media requires a “hot story” to report – and an explosion follows

which will destroy all sides of the proposal.

BOTTOM LINE. We all are touching the same real estate elephant at distinctly different points

of the body. We all have a blindfold on (or at least blinders to the position of all others).

Recognize this one reality, and you will eliminate at least half of your frustration with the

multiple levels of government you will need to complete your goal.

Andy Chess