As Landlords (Temporarily) Rejoice, Renting Still Has Its Merits
“Every cloud has a silver lining” & “The grass is always greener on the other side”
(Popular Axioms)
I’m not sure I’ve ever read an article that talked about the “joys of renting.” I’m sure it exists somewhere. Maybe it’s because I’m saturated with a bunch of real estate industry communications that always tout “the dream of homeownership” and how everyone should strive for it. I’m bombarded by banter like, “There’s no feeling like stepping over the front door threshold for the first time and knowing that you own the home”*.
* As my uncle likes to point out, it must be the warm feeling that comes from knowing that your bank actually owns most of it.
The way home prices and rents have shot up, the pro-homeownership articles seem to have a lot of merit! After sorting through all the mail and texts from investment groups hungry to buy homes, it is sometimes shocking to see what prices they are offering. It makes me think, “I don’t think I have much money, but these people are telling me I’m sort of rich…”
But as a veteran of leaner landlord times when rent barely covered the mortgage (and often went negative when repairs and vacancy happened) and it was hard to sell a house, life wasn’t always so rosy. I often thought of how renters had it pretty good in many respects:
- No fear of a $10K repair call at any moment
- If something major breaks, call the landlord and let him deal with it
- If you want to live somewhere else at any time, just move. No fuss, no muss.
That all holds true today.
So, though it seems landlords have a better situation now, things change. Renting will always have merit and hot markets always turn sour at some point.
Homeowners and landlords are able to enjoy current market conditions (and they should!), but renters shouldn’t feel totally left out. Things always swing back and forth and renters always have some built-in advantages in any market that owners never get to enjoy.
But, for now, landlords should rejoice!
(Very) Happy Landlording!
Learn More
Rental Tenant Interviews: 3 Additional Questions To Ask
“Winning is not a sometime thing; it’s an all the time thing. You don’t win once in a while; you don’t do things right once in a while; you do them right all of the time. Winning is a habit. Unfortunately, so is losing.”
Vince Lombardi (former Green Bay Packers Head Coach)
With low unemployment numbers, job applicants seem to really have the upper hand in the hiring process now. The stories are interesting, if not shocking, to someone who remembers pleading for employment back in the day. I remember it being nerve-wracking going into interviews and then wondering how things went afterwards:
Did they like me?
I might have blown question #3; I hope that doesn’t sink me
How long should I wait to get a call back before following up?
Where’s a stamp to send a “thank you” letter for the interviewer?
My greatest weakness? Oh, sometimes I just work too long and hard and forget to eat…
But now, the onus seems to be on the companies. They need workers! They ask:
What kind of coffee would you like? We have lots of different kinds and sweeteners! Oh, you want Gatorade instead? No problem! I like your style already!
When did you say you could start?
Do you prefer a car service to work or did you just want to work from home?
Is this person going to show up or did we get “ghosted” again?
Fortunately, for property managers in Charlotte, the advantage is with the landlords (for the time being…). There are a smaller number of Charlotte-area rental homes available for prospective renters, especially those priced on the lower side. It is not uncommon to get many rental applications on the first day a rental home comes on the market. Tenants compete to secure these homes.
But with so many applications, how does one choose a winner?
Sticking with the basics is paramount- credit and criminal background checks, landlord history, employment/income verification. These are the backbone of finding the best candidate. However, there is often a lot of grey area left after finding out this basic information, especially when several potential renters have very similar background results. It can be tough to figure out who to approve.
So what to do?
There’s a common saying in human resources that the job interview begins at first contact; so what has the prospective tenant shown us so far in our dealings? Here are three questions that may be helpful in further assessing closely qualified candidates:
- Were they on-time (or early!) if we met them at the property?
- How long did it take for them to provide any documentation we needed to run their application? Did we need to ask several times?
- (And what I think is the most telling) Have they been pleasant to interact with?
As Coach Lombardi said, “you don’t do things right once in a while; you do them right all the time.” It’s a habit. Regular background checks will reveal much of the habits of applicants. We want tenants with good ones! And courtesy, responsiveness, and (especially) pleasantness are other habits that are invaluable to landlords.
Happy Landlording!
Learn More
Still Gotta Buy Cereal… Lease Renewal Discounting Opportunities
Grocery store prices have really gone up! Whether it’s due to inflation, the war in Ukraine, gas prices, Will Smith punching Chris Rock at the Oscars, or whatever explanation mega-corporations think the public will best swallow, it’s been sort of shocking how much more things cost percentage-wise.
This leads to an issue in my house. My son is a picky eater (following the youthful pattern of his old man, unfortunately…); finding things he is willing to eat is difficult. Fortunately, Honey Nut Cheerios have been on his acceptable list for a while now and are a go-to for at least 1 meal a day. But prices have gone up and substitute store brands don’t pass muster, so we are in a conundrum.
General Mills’ stockholders are pleased as we are forking over a dollar more per box. I’m somewhat positive their actual increased costs are a fraction of that, but “never let a crisis go to waste” has long been part of good business acumen. So we grit our teeth and pay it so the young tyke can survive.
Tenants are in a similar situation now. As their existing leases are coming up for renewal, they are finding that the rental prices offered to extend them are much higher than their current rate. This leads many to quickly try to locate the greener pasture of a cheaper rental home. But these homes are largely non-existent as most landlords have followed suit and raised their rental home prices as well. They find the rent they are currently paying is a huge bargain to what their new rate would be, but, unfortunately, also to what other homes are renting for. What to do?
The old answer would be to take this rental market and shove it! Become a home buyer! Build wealth! Get a fixed rate mortgage so that the monthly costs of the home would never go up! But the only thing harder than the rental market currently is the “for sale” market. Talk to anyone who has tried to buy a house in the past few years. Mission (almost) Impossible- and, if successful, you’re not buying a bargain!
So, again, what to do?
For tenants, it’s a tough situation. I’d recommend being qualified to purchase and then to scour deals for sale and rent; then look to see and apply/make offers on a lot of houses. A less stressful strategy would be to just batten down the hatches and wait things out until there is an inevitable housing market downturn. It’s the “stay put and stay solvent” strategy.
But, as a landlord, what is a good strategy on lease renewals? Landlords are in a good spot in today’s housing environment. I think there is a temptation to raise the rent to or above market rate to maximize cash flow. And then hope the tenant stays (and can afford it).
However, I’d offer a contrarian strategy of not putting existing tenants over a barrel. True, it might be difficult for them to find another place to live so there is an inherent advantage that wouldn’t be exercised. But if they have been good tenants who take care of the house and pay on time, I’d recommend pricing the lease extension rate 5-10% below the prevailing market rate for a vacant rental.
But why?
Several reasons:
1. Fix-up and vacancy costs will probably push the payback period to over a year. If the new tenant leaves after their 1-year lease expires, it’s a lot of activity to produce a loss.
2. When tenants examine the rental market (and they will!), they will see that the renewal terms are a relatively a good deal and will be more inclined to stay.
3. Good tenants are worth their weight in gold! Continual cash flow from good tenants pays down landlord mortgages and reduces wear on homes. And call me soft, but good tenants do deserve some type of positive consideration for keeping their part of the lease. It’s good business.
Higher prices are hitting different groups differently, but people still gotta have somewhere to live and afford cereal too. Housing discounts aren’t as ubiquitous as Cheerios coupons, so use lease renewal discounting as an opportunity to keep good tenants.
Happy Landlording!
Learn More
Rental Tenant Screening: If You Have to Ask… You Shouldn’t
“If you have to ask, you can’t afford it.”
JP Morgan
I recently had hernia surgery which went fine (thanks for asking!). It lasted about 45 minutes, was pain-free (while I slept), and the recovery seems to be complete. The process was smooth.
The issues I had were pre-procedure while trying to figure out how much it was going to cost. I had a choice- I didn’t have to get the surgery per se. I had some discomfort from time-to-time, but I think I had had the issue for around 25 years and there was no rush. So I was trying to time it right with my insurance so I could pay the least amount out-of-pocket as possible. My question was, “If I schedule the surgery next month, what would the approximate cost be?”
This was apparently a difficult question. “Sir, it depends if the anesthesiologist is in-network or out-of-network.” “Mr. Furniss, it is not the simple. If the surgeon finds further issues while he’s in your body, it could take longer and cost more.” I get it. It’s not an exact science. But if I ask my plumber how much it costs to fix my garbage disposal, he can give me a ballpark figure on what it usually costs. I just wanted to know what to expect if the doctor didn’t discover that several of my nearby organs were failing. You know, garden variety surgery cost figure stuff. It was a painful process and I never got the answer I was looking for.
“If you have to ask, you can’t afford it.” When the $32K bill came (before insurance), I guess the saying had some merit.
I bring up this story because I was thinking of some of the worst tenants we’ve ever had in our 20 years of being in the property management business. Most of them had some “red flags” on their applications. When we discussed what we found during our application screening process with the prospective tenants, they explained it in such a way that it was easy to sympathize. And, usually, the rental house had been on the market for a while and the owner was anxious to get it filled (we were too!). This led to approving some tenants far in the gray area.
These tenant approvals made me nervous in my stomach. When we met to sign the lease, I found myself asking some variation of the same question:
“You’re going to be great tenants, right?”
Inevitably, the answer was always the same. “Oh yeah, we’re going to be the best tenants you ever had! We’re going to pay on time every month, you’ll see. When you do your inspections, you’re going to think cleaning and lawn care people live here! All we were looking for was someone to give us another chance.”
And, predictably, they were not the best tenants we ever had.
And I started to realize that if I ever felt I had to ask that question, it was the clearest sign that we shouldn’t approve the application.
I learned the hard way that JP Morgan was on to something that was applicable in the property management field. “If you have to ask, you shouldn’t.”
Happy Landlording!
Learn More
Finding Value & Buying Rental Homes on Your Credit Card
Fresh out of college, I was living in New York City and was slinging cell phones by day (they were relatively new back then) and dreaming big dreams at night. How could I become financially successful like many of the people I was passing on Wall Street everyday? I wasn’t overly into finance, but started reading a lot of material from the real estate gurus. Be a millionaire with no money down! Live off of passive income to live the life you’ve always imagined! It’s so easy anyone can do it!
That sounded right up my alley- easy and something even I could do. If that mother of 6 in El Paso could be netting $25K month in passive rental income, surely I could do half of that? I was all-in. Unfortunately, New York City real estate was prohibitively expensive for me to buy (got $1M to plunk down?), so I wasn’t sure how I would get started.
So I moved to Charlotte and became a full-time Charlotte real estate investor. The $1M homes were replaced with much more affordable options. I posted classified ads (“We Buy Homes!”) and tried to follow the guidelines from the infomercials. I joined an investment club and started getting calls and e-mails for discounted homes to buy.
Many of the homes were really cheap, some to the tune of $50K. The problem was to what to do with them after purchase. Most people didn’t want to live in them as they were in “war zones”. I’ve never been a gun guy, but visiting some of these homes made me think hard about my self-protection stance. I didn’t feel overly safe at many of them and replacing broken windows constantly didn’t seem economically savvy. So I, and others, passed on buying many of these homes (laughable now, right?) and they languished on the market for months and years.
One day, I visited one of these types of homes and was not really interested. The seller said she was negotiable on price, but I liked being alive and really didn’t want to be involved. Plus, she said she needed to close really quickly and needed cash, and I didn’t have a ton of cash on hand. I figured I’d ask what she was looking for before declining.
$8K.
Well $8K was in my wheelhouse. I wrote up the contract and asked the closing attorney if he would take one of my Visa checks that came in the mail earlier that week from my credit card company. No problem!
Did I want this house? Not really. It came with issues. I had to sink another $20K into it just to make it habitable for a rental. And the area wasn’t great. But $8K? Come on! I had to do it.
I learned that every asset had a price.
I got a call recently from a prospective client who asked me if her home had a realistic chance of renting. It was in a desirable area and she lived there currently, but the kitchen wasn’t redone and it had an older layout. Did she need to sink $50K-$100K into it before it could go to market?
The answer, without even looking at it, was “yes” and “no”. The real question was how much she wanted to rent it out for. Would it rent for as much as the remodeled home down the street if it wasn’t renovated? Probably not. But depending on the rental price, someone would gladly take it. There are 66 people on average moving to Charlotte every day who need a place to live!
Real estate, like anything, is a value proposition that has a suitable price. A rental house priced at $3K/month may sit, but at $2K it may fly off the market. Value is what matters. Top conditioned homes will rent out the highest, while homes in poorer condition will rent out for less. The market is relatively efficient.
Happy Landlording!
Learn More
Santa’s Influence & Rental Home Inspections: Naughty or Nice?
He’s making a list
He’s checking it twice
He’s gonna find out who’s naughty or nice
Santa Claus is coming to town
(“Santa Claus Is Comin’ to Town” written by J. Fred Coots and Haven Gillespie)
Oh, Santa Claus! He’s the mythical man who causes such delight and fear in the hearts of children (and some misinformed adults). He can be a best friend who showers good kids with gifts, or a cold, disapproving, gift-withholding coal-dispenser.
Parents have long used Santa’s inexplicable worldwide influence to ply good behavior from their children, especially in the month of December. There are several proven manipulations:
1. Santa the Spook: He’s watching you… all the time… his values are perfectly aligned with your parents… you could blow this Christmas big-time if there are any incidents… he sees all- yup, even that…
2. Santa the Bully: Do you want to get any presents??? Do you??? Then you better be good! Do you think Santa is playing? He’s been doing this forever and knows payback better than anyone. Do you feel lucky, punk??? Don’t try Saint Nick …
3. Santa the Eager Rewarder: Santa loves you- he really does. He wants to get you those Legos… but if you take the screws out of your sister’s bed, how is he going to justify giving you the galactic mother ship when Mrs. Claus asks? Even the reindeers would revolt if you were rewarded for that behavior. Just make it easy, be good, and let the Lego ship will fly down your chimney on Christmas Eve…
The Santa illustration can be carried over to our bi-annual home inspections. For clarity purposes, our rental home inspections include an on-site visit of approximately 10 minutes where we have a checklist of things to look at (air filters, smoke/CO detectors, pets, smoking, etc.) and we take some pictures of the interior and exterior. And, yes, we check our list twice.
The question is: “Are home inspections naughty or nice?”
As a property manager, I initially wasn’t a huge fan of conducting home inspections and had them on the “naughty” list. I figured the tenants were going to be staying in the home largely regardless of what we saw (short of some major discovery at the home) for their lease duration, so I wasn’t sure what we were trying to accomplish. Badgering tenants into compliance also seemed to be a loser’s battle. And, to boot, tenants did not like the home inspections either and would gripe. The whole thing seemed like a waste of time and resources to me.
But we did them anyway. As time went on and we had years of home inspections under our belts, visiting the homes twice a year proved to be really beneficial! At first take, there were some smaller, auxiliary benefits for our owner clients. We were able to catch some repairs early and head off some more major issues. We had a good idea of what a home was going to look like after the tenants moved out. We could eyeball certain tenant complaints in person and see if they had merit. We built better personal relationships with some of the longer term tenants we would visit. And we elongated the life of HVAC units as we made sure the air filters were changed regularly.
But the largest benefit was that we got the homes back in better shape. And I would attribute that to the “Santa” influence effect. If people think someone cares and is actually checking, people tend to put more thought and time into their efforts. Home inspections are a good reminder that the landlord cares how the rental house is kept and the tenants should too. And most of them do!
Rental home inspections seem to limit naughtiness. So Santa (and this property manager) now put them firmly on the “nice” list.
Merry Christmas & Happy Landlording!
Learn More
Retired Boomers & Seasoned Tenants: Needing People Who Get Things Done
“The information learned while attending college is meaningless to employers; the college degree itself is the prize. It shows you were smart enough to figure out how to graduate.”
(My late brother, Gregg Furniss)
My wife and I were coming back from a weekend trip recently and stopped in for a “quick” bite to eat at a roadside Wendy’s. Oh, I was psyched to take down my chocolate Frosty.
We were waiting in line inside the restaurant and started to talk to some older gentlemen behind us. I had my UNC sweatshirt on and they were making some small talk about the upcoming basketball game that night. They were nice guys, probably retired, as they seemed to have no issue with the 20-minute wait.
Me, on the other hand… I tried to game the system and quicken things up. I popped out the Wendy’s app on my phone and ordered from there, hoping to just nod at the cashier and pick up our order when we eventually got to the front of the line. But, as it turned out, things didn’t pan out as expected…
Cashier: Welcome to Wendy’s! How can I help you?
Me (smartly): I ordered on the app (and picked up a free large French fry for doing so too) and already paid for it. It should be under “Brett”.
Cashier: Oh… mobile ordering hasn’t worked in weeks. Can I take your order?
Me: But I already paid…
Cashier: Oh? You’ll have to figure out how to cancel your order.
Me: It already ran my credit card. How does one cancel the order when the app says it’s already in my “order history”?
Cashier: Not sure.
Me: OK… I guess we’ll order and pay again (and forfeit the free fries for mobile ordering…)
And when we finally got the food, the order was wrong. From a customer perspective, it was a fail. However, anecdotally-speaking for current retail establishments, this seems to be par for the course due to COVID-related employment shortages.
I thought of those older guys behind me. They seemed to be smart (they’re UNC fans!) and unemployed. And I’d argue underutilized. I wanted to make a passionate plea- we need you guys!
When Boomer-bashing became in vogue recently, it was largely unfounded. These guys (and gals) helped build this country. They’ve got skills we’re sorely lacking right now (especially on the retail front)- they have a track record of getting things done! Every time I’m getting frustrated trying to buy stuff in person, I’m thinking I want to fill out an application and help the establishment do things right.
But as a Gen Xer, I’m in the thick of it. I’ve got a job, two young kids, and don’t have the time to take it on. But our country has millions of unemployed, well-enabled potential workers on the sidelines. We need you, retired Boomers! Help us! Your wisdom and leadership would make a world of difference. You’ve worked for years in different environments and persevered. You could help train up broken places of business and be helping co-workers and society in general. You got things done and we are in a place where we need people to do just that. And it could be fun!
Experience counts. And it counts with rental tenants too.
When looking at rental applications, there are a lot of schools of thought on what to look for to secure the best tenants. We look at credit scores, criminal background, income, employment, and landlord history. But as someone who has done this for a while, landlord history trumps everything. Do they show a pattern of paying on-time and staying around for a while?
For example, if a prospective tenant has rented somewhere for 6 years and has largely paid a comparable rental rate on time, my expectation would be that they would continue to do so in one of our rental homes. Unless there was something completely out of whack in the other screening checks, I’d take them in a heartbeat. Low credit score? If they’ve gotten the rent paid for 6 years straight, they’re probably a good bet.
Generally-speaking, most of our owner clients want tenants who are longer term, do small repairs on their own, maintain the property well, and pay regularly. These seasoned tenants typically have rented for years and know how to be good occupants. They ask for help when needed, but understand the game. They take care of their end and we take care of ours. Everyone wins.
As a society, we need good employees. As a property manager, we need good renters. People with a history of accomplishment are valuable.
Happy Landlording!
Learn More
Rental Homes: You Break It, You Bought It?
“The “Pottery Barn Rule” is an American expression alluding to the policy of “you break it, you bought it” or “you break it, you remake it”, by which a retail store holds a customer responsible for damage done to merchandise on display. It generally ‘encourages customers to be more careful when handling property that’s not theirs.’”
Wikipedia definition of the “Pottery Barn rule”
I think every parent has there own story on this concept. My version comes in “Hobby Lobby” when my young son smashed a glass Christmas vase while “admiring” it. I was within a 50-yard radius (which apparently puts me in the “bad” or “absentee parent” category); I heard the crash and prayed no Furniss was involved. I wasn’t so fortunate.
The next step was to ‘fess up to a cashier or store manager. As I searched the available employees up front, I was left with the strategic decision of who to approach:
- The 17-year old (does he look apathetic or one that would stick me with store policy?)
- The middle-aged woman (does it look like she might sympathize/empathize? Or is she the type that makes an example of a parent who prioritizes reading “Calvin & Hobbes” ornaments over watching his kids on the other side of the store?)
The downside of either was $17.99 + tax and a stern look. The upside was getting off with a warning. I approached the front gingerly and dutifully offered to pay.
“Don’t worry about it! It happens all the time!”, the middle-aged woman cheerfully chirped. “Chip! Go clean up aisle 5.” The 17-year old gave me a look and grabbed a broom. Mercy won out.
One of the hardest things of being a property manager is the security deposit dispensation after a tenant moves out. Homes are rarely left in perfect shape which leaves the owner paying a bill to get the rental home back in market shape. The question that is left is how much of the bill should the tenant shoulder and how much falls under “normal wear and tear”, which is legally permitted.
The problem is that nothing in a house costs $17.99! Things are expensive. Steam cleaning a carpet costs a few hundred dollars; if the carpet needs to be replaced, it’s now in the realm of thousands of dollars. The costs are similar for painting- touch-up can be much less versus a full paint job, but it’s still in the several hundred dollar range.
Very few tenants ‘fess up and offer to replace the carpet or paint the house after they vacate. In fact, most say that the “place was like that when they moved in” and not getting their full security deposit back is nothing short of an injustice. Property managers tend to utilize pictures/videos and tenant-filled out “move-in inspection reports” to document what the home looked like prior to home occupation. These are helpful to ascertain the truth.
Regardless, costs can be high if a home is not taken care of. And if not, there can be a large degree of sticker shock when a tenant receives a bill for repairs that runs in excess of their security deposit. How could this happen?
The components of homes are expensive. And someone needs to fit the bill. The assumption can’t be made that the landlord pays for everything short of a wall being knocked down. “Normal wear and tear” cuts both ways. Abnormal wear and tear is costly and the tenant is legally responsible for it.
It is a win-win when a landlord can return a non-docked security deposit to a tenant- trust me! Then no one needs to shell out funds to repair folks and a house can be turned over for another family to move into; this is the most desirable and profitable outcome for all involved.
But, with rental homes, if you break it, you bought it. It may “happen all the time!”, but someone has to pay the piper and most home issues are not cheap to fix. Smashing a $17.99 Christmas vase is one thing, but see what the “Hobby Lobby” cashier says if your kids clip the branches of their $2K “Super-Deluxe” Christmas tree.
Happy Landlording!
Learn More
Comfort of Old Cars & Non-Perfect Rental Homes: Does Anyone Care?
“Champagne tastes with beer budgets.”
Common real estate agent lament
I drive an old car. And it has lots of miles (almost 300K!). I’m reminded of this from time to time:
“Dude, seriously? You’re driving that? Don’t you want to step things up a little?”
An old friend
“You thinking about buying a new car soon? I only ask because I’m looking to buy a car for my teenager and thought you might be interested in selling… How does it run?”
Pastor at my church when I saw him in the parking lot
I get it. Nothing looks like success more than a new, nice car. If you want people to think that you’re the “property manager to the stars”, you shouldn’t be driving a beater. Realtors especially lock into this mindset. A nice car means lots of closed sales. “You look good, you feel good, you sell good” as the old salesperson mantra goes.
But there are positives to driving a beater. First there’s an overall peace of mind (if it doesn’t breakdown). For example, when I take things out of my car, I don’t particularly care if it scratches the paint or rips the seat. When I walk out of the supermarket and someone has dinged my door, I’m OK. When my young kids spill something in the backseat, I’m not reading them the riot act. I’m cool. No worries.
There’s also the financial piece. There are no car payments. The taxes are low. Occasional repair bills are taken in stride as they are lower then having a new car. Insurance is lower with a “liability-only” policy. I’m not worried about additional miles detracting from the value of the car.
Most people don’t subscribe to my “peace of mind” thinking. They want to look cool. I’m OK with that, to a point.
I see a similar thought process play out in rental homes. As rental rates continue to rise significantly annually (in the Charlotte-metro area, newly offered rents increased 16.7% from September 2020 to now per CoStar), the tenant income levels needed to support the higher rents also need to rise significantly. But people’s incomes are not going up 15%-20%. This is where all the press about the lack of affordable housing comes from. Renters are becoming “severely cost-burdened” where over 50%+ of their incomes are going to housing costs. That’s a huge percentage (which many experts call a crisis).
What has contributed to this crisis? One factor is the decision a landlord is generally left with after their tenant moves out and they are preparing the house for the next tenant. Do they spend a lot of money to make the rental house look great (full paint jobs, new carpet, new appliances, etc.) or do they try to “let it ride” (minimal to no touch-up paint, steam clean carpets, entry level appliances, etc.)? I think with all the HGTV housing television shows, many owners decide to fully refurbish their rental homes. By employing this strategy, they are looking to get top rent when it goes back on the market.
This only works when tenants play along. Tenants need to be willing to sacrifice a higher percentage of their incomes for a nicer, updated home.
And they are! Even when they clearly can’t afford it.
When some of our clients “let it ride”, we accordingly price the house lower. The owner chooses to accept below-market rents to avoid a pricey fix-up bill. They play the long game; every year that goes by, they use the rents to lower their mortgage payment until it goes away (that’s when the landlord game gets a lot more fun!). And as a bonus for the tenants, they keep more of their money. They also get a lot more leniency on their security deposit deductions as the house is already worn, so any mishaps they inflict on the house aren’t so noticeable or costly when they move out.
But many tenants choose not to make this trade-off. “The carpet is stained! The walls have some scratches! The refrigerator is old!” Um, that’s why it is priced lower.
Most tenants don’t seem to care. Frankly, it’s shocking to me. I’ve expected more tenants to happily make the trade-off for the peace of mind it offers.
Old cars may not look cool, but they may allow for a cooler, more peaceful life. But if this line of thinking has little appeal, I suppose landlords need to give people the housing they want.
Happy Landlording!
Learn More
Do You See Property Management Like Michael Jordan?
“Sometimes when I consider what tremendous consequences come from little things, I am tempted to think there are no little things.”
(Bruce Barton)
“Catch for us the foxes, the little foxes that ruin the vineyards, our vineyards that are in bloom.”
(Song of Solomon 2:15)
A while ago, I was talking to a family member I don’t get the opportunity to converse with very often. It turned out he owned an out-of-state rental property that he was self-managing and he began to tell me about it.
Family Member: So things are going great! I have a long term tenant who makes her $800.00 rental payment like clockwork every month; she even has it direct deposited into my account on the 1st!
Me: (talking): Reliable long term tenants are awesome. Congrats!
Me (thinking): $800 a month? Could that possibly be close to the going rate in this crazily appreciating housing market?
FM: And I don’t even have to think about the house. If she needs something repaired, she calls. If not, I never hear from her.
Me (talking): Low maintenance tenants are great. Congrats!
Me (thinking): No on-site inspections ever, not even a heads up from a repair vendor you work with regularly that can let you know if they see something awry? Are the air filters being changed? Animals in the house? Smoking indoors?
FM: And it’s a total win-win relationship! She doesn’t use the all the space, so she rents out some of the rooms on Airbnb for extra cash.
Me (talking): I guess that ensures she can make rent each month. Congrats!
Me (thinking): If you are allowing this, are you getting a cut? That seems like a lot of risk as the homeowner for (what sounds like) no compensation. Do you know who is coming in and out of your home? Is there any type of insurance being utilized if a renter is an axe murderer and takes out a few neighbors or starts cooking meth in the house? And is there consideration for all the people rolling through adding additional wear & tear to the home?
When you’ve done something as a vocation for a while, your thinking gets warped and can really make you sound like a wet blanket.
I imagine it’s like telling Michael Jordan you put up a shot in a pick-up game at the park. He sees a different game than a weekend player. He might ask:
Where did you shoot from? How much space did the defender give you? Did you jab step? Was there a lane available to drive to the basket? Where were your teammates? Should you have passed it out instead? What was the score at the time? Who was sliding back on defense to cover your man if your opponent threw a long pass down court off of a rebound? What type of loft did you get on the release of your shot- was there potential for a long rebound? Did you feed the ball to your big man inside first?
Whoa! I thought basketball was supposed to be fun? That sounds like school with an aggressively tense teacher. I mean, do these small details really matter anyway?
I think so. When I’m flying, do I want my pilot checking the wind direction or knowing what to do if geese get in the plane’s path (kudos, Sully!)? Or if my daughter is going to the doctor, do I want a licensed professional who knows what questions to ask and what tests to run to head off any larger health issues? Of course! One missed detail could bring dire results.
Michael Jordan won six NBA Championships by being detailed-oriented (and really good, of course!). In the same way, it’s imperative to have a property manager who is experienced enough to ask the right questions and be uptight on the details (even if it makes for awkward conversations with family members sometimes).
Happy Landlording!
Learn More