To paraphrase Dickens “It’s the best of times and the worst of times” to own rental property.
Rents are up, vacancies are way down. The market is hot. On the other hand, eviction court is overflowing, lawyers are swamped, and repair crews can’t catch up with the ever increasing expectations of the renters (from mold to radon to unending complaints of plumbing, heat and ants).
Meantime, our property rights seem to be further eroded every day with new regulations, changing standards, not to mention the tenants’ rights advocates.
If it’s true that “bad things happen to good people” – it’s also true that great landlords can end up with rotten tenant experiences. There are numerous horror stories we hear about - such as the missing bathroom fan cover that helped sway a judge to toss out an eviction and give free rent to a non-paying tenant due to “habitability” issues left unattended by the landlord. It can be scary out there, and it’s easy to get on the defensive.
However – as in pro sports, the best defense is often a great offense. How do we address the threats? Frank Sinatra said “The best revenge is massive success.” Maybe we don’t need to learn legal martial arts. My son’s karate instructor emphasizes at every class that the best way to win a fight is to avoid it in the first place.
So, let’s discuss ideas on how to lessen turnover, minimize vacancies, attract the best occupants and generate the best ROI on our rentals. Let’s discourage litigation and encourage managing our rentals above the minimum standards. To misquote St. Augustine, let’s “Love Landlording, and do what we will” in order to thrive in the rental housing businesses and have great tenant relations.
Steve Martin had a shtick called “How to earn a million dollars and not pay taxes”. He said it was easy. First, earn a million dollars. Then… don’t pay taxes. If the IRS asks what happened, just say “I forgot!”
Some rental property owners operate their business the same way. They read a book called “How to Get Rich in Real Estate.” It instructs them to get a rental and move in a tenant. If the tenant stops paying, they've read, “Just get another one, and then, start again!” It’s pretty simple, right?
Here is a question: Can you describe your perfect tenant? With whatever profile you create, there are always exceptions. One thing we learn over time seems to be that the tenant who moves in is often not the same as the one who moves out. Their charm fades over time and the fastidiousness they had moving in gives way to the predictable wear and tear of the unit, which we are left cleaning up after.
Yet while we are trying to figure out how to find, screen and rent to the ideal tenant, there’s another essay somewhere out there for tenants on How to Find the Perfect Rental. They hear tales of owners who are unscrupulous and buildings that are falling apart. They seek to identify the perfect landlord! Any idea on what they are hoping to find? “Someone who leaves them alone, fixes everything they ask for, and never raises the rent.” Is that how we see ourselves or how we want to run our business?
I think it is time to confront the chasm that has developed in the tenant / landlord relationship. The first step is to challenge the notion that we are Real Estate Investors in the real estate business and that our assets are our properties, (precious castles, for which we need to employ effective tactics to help protect from the onslaught and misuse caused by rampant hordes of invasive tenants).
What if, instead, we updated our feudal image from “Landlords” to a more modern and truer job description and re-branded ourselves as “Rental Housing Providers”? Maybe it’s time to own up to the fact that we work in a customer service industry; that our assets are our tenants. Without paying customers, our rental properties are just money pits requiring constant maintenance and repairs – and left vacant they’ll die on their own of neglect. Perhaps it’s time to re-examine our business plans and adjust to changing social mores.
In the spirit of this challenge I submit that as Rental Housing Providers, we need to value our tenants as “important relationships that we participate in common with, towards a successful end” rather than just “necessary obstacles with whom we need to put up with and protect ourselves from”.
Having a successful rental business is not so much an issue of finding and keeping good tenants, rather it’s a question of:
· How can we provide quality housing, develop positive relations and remain competitive?
· Are we doing all that we can to achieve the best possible results for our business?
· And, ultimately, will the best tenants come our way and want to choose our rentals?
There is no “one size fits all” way to address these questions, but it starts by sizing up what kind of property we have to offer and making some realistic observations and creating a plan. We should ask: What do we want from our investment properties? Are we just looking to create an income stream? Are we just looking to off-set expenses? Do we have a long term goals here? Have we created a realistic budget? In other words, why are we in the rental housing business and can we make improvements?
Our answers affect how we meet the challenges we will certainly face; and that affects what kind of tenant relationships we develop; which affects how much turnover we have, and our bottom line!
There is an old saying that “wherever there is dependency, there is hostility”. Are we being held hostage by the rent we get every month? Or do our tenants feel dependent on us for their basic security and stability?
One axiom of negotiation strategy states that the party with the least commitment holds the most power. So the secret to being a great Rental Housing Provider is to not “need” the tenant. But listen to what I mean by this… It’s not like Bill Cosby who said to his son “hey – I brought you into this world and I can take you out of it, and it don’t matter to me ‘cause I can make another one who looks just like you!” Not needing your tenant actually means really wanting your tenant.
If we want our tenants to enjoy paying us rent, and to take pride in their home, then we need to:
· Provide the right environment for that to happen, (after all, it’s our property, right?!)
· We have to respect them and their issues (there is no such thing as an unimportant detail).
· Believe that the quality of housing goes beyond the minimal legal standards.
If we can achieve these ends, then the issue is turned around and we can insist that the renters will then maintain their side of the covenant. They should feel privileged to rent from us!
Now here’s the rub: Just because the act like they are “entitled” doesn't mean they aren't…
Housing is fundamental. If you've read Maslow you know his hierarchy of needs. Right above basic survival of food, water and shelter is Safety - including freedom from fear. Few businesses cut as close to the bone on basic human emotions as housing. When you think about it, we are perceived to have awesome control over the lives of our tenants. No wonder there is so much drama in property management!
Yet in order to have happy tenants that treat us and our real estate well, they need to feel secure in their home. “When people nest, they act their best.”
Obviously, a 4 bedroom 3 bath SFR is going to have different dynamics than a 16 unit building of 2 bedroom apartments. But no matter what type of housing we own, the starting point is to figure what we need to do in order to truly give it those 3 magic words: “pride of ownership”.
When we go out to eat, whether it’s steak and lobster or just off of the dollar menu, we don’t want to take our family to any restaurant that is operating at the bare minimum of health and safety codes!
There are old landlord axioms that state: “Any color so long as it’s white”. Nothing fancy – it’s good enough for a rental. Buy FHA grade carpet. Let’s get new “used” appliances. The list goes on. But there are other familiar adages too –like, “What you sow, so shall you reap”. Or “treat others as you would have them treat yourself”. How about this one – “Could you live here?”
It’s been said that in business, one should deal in commodities they regard well. If you are a vegetarian, then buying a hot dog stand might be a bad idea. In rentals, consider the property from the eyes of a tenant. We ought to feel like we could rent this place to someone in our own family. As Rental Housing Providers, we should strive to be the landlord that the best tenants would want to have.