What To Do When Elon Musk & Bill Gates Both Apply for Your Nice Rental House
In this month’s edition, we have a riveting property management fairy tale! Once upon a time in a nice, far-off place called “Charlotte, NC”, a nice landlord put a nice, vacant rental house on the market. Now the market was not too hot, not too cold, but just right…
The next day, a nice rental application was submitted for it. And the day after that, another nice rental application was submitted. The nice landlord dutifully ran the applications and found that both applicants looked to be fully qualified:
Tenant #1:
Elon Musk
802 credit score
Criminal record: 3 traffic tickets in last 3 years
Employed: CEO of X, SpaceX, & Tesla, Inc.
$221.4B net worth
Homeowner: no recent personal landlord history
No pets
Move-in date: 35 days from today
Length of lease desired: 2 years
Tenant #2:
William (“Bill”) Gates III
814 credit score
Criminal record: None
Employed: CEO of Bill & Melinda Gates Foundation
$127.3B net worth
Homeowner: no recent personal landlord history
Pets: 1 cat (10 pounds) & 1 border collie (60 pounds)- aware of non-refundable pet fees
Move-in date: immediate upon acceptance
Length of lease desired: 1 year
The nice landlord has a very nice problem! Two well-heeled applicants want his rental property. They have 800+ credit scores, no criminal background issues, plenty of income, and no landlord issues. That is great!
But outside of the nice fairy tale, is it really great? How would a regular landlord pick a winner and a loser? He may have to be not so nice?
The Musk application has many positive aspects with it having no pets and wanting to lock into the property longer with a 2-year lease request. But there is a 35-day wait for occupancy (each vacant day costs money!) and there is a criminal record (frequent speeding tickets can signal risky behavior).
On the other hand, Gates wants to move in right away (cha-ching!) and has a higher credit score than Musk. But he does have a lower net worth and who knows the damage the 2 pets could do to the house especially if he leaves after the initial lease ends.
So under normal circumstances and with no one else involved, both tenants would easily be approved for the property. But there is only one home. And they probably don’t want to share it. So what to do?
It’s a tough one and it happens every so often. Unfortunately, the non-approved person usually gets upset. But a decision has to be made.
I don’t think there is perfect methodology for this. Some landlords use tactics such as:
- First application in gets first dibs on the house: I like this one due to its simplicity and it seems to have the “get in line” logic that most adults can appreciate. Its major flaw is that a property manager really needs to pick the best available applicant for the owner client, regardless of who was first. If a marginal candidate applied first and then Bill Gates submitted an application, should I be married to the marginal candidate? I don’t think so.
- Make the applicants give their “highest & best” offer: The rent is listed at $2K/month. “How much rent are you willing to pay if we let you have the house- $2,500/month? Will you sign a 3-year lease? Move-in right away?” We’ve done this on occasion and it’s a lot of effort and most people don’t want to play (I’m not sure I would either). Due to the bad feelings it creates, I largely tend to shy away from doing this.
- Have some sort of points system based on all quantifiable application information. Add up the points and whoever has the highest score wins the house. This does not take into account any non-quantifiable information (or “soft skills” for lack of a better term) which tend to matter a lot with tenant relations.
Trying to make a choice between great tenants can be a good problem to have if handled properly (in and out of fantasyland). But I think I’d go with Musk application on this one. It’s very nice!
Happy Landlording!
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Crushed by Cumulativeness: Rent Increases and Why the NFL Player Didn’t Sign Your Kid’s Football
“What a jerk! All he has to do is just sign his stupid name to ONE football and it would mean the world to Little Johnny. But instead he needs to hurry to the locker room to recount his millions of dollars!”
(Reaction of many parents after their child’s autograph request is snubbed)
I was talking to a local college football player (a kicker, if you must know) about what he was doing after he graduated in May. He said he was starting to figure that out being that he finally had some time to think about it.
Some time? He’s in college! I was thinking of how wasting time was sort of what my friends and I did during our undergraduate tenures…
“You don’t have any time? How did you get so scheduled out?”
He pulled out his team-issued iPad. “Do you see this? I had to look at this every day for the last five years; it told me where I was supposed to be and what I was supposed to be doing every hour of every day… Now, honestly, I’m adjusting to doing life without it.”
Wow! That sounds pretty demanding for a college kicker at a small-time football school. If I were him, I think I would have opted for intramural soccer.
Now let’s think about NFL players. There are even more football activities than college. They are travelling for training camp and games. If they don’t do well, they can be cut at any time. If they want to get better, they need to take the time to practice, lift weights, and study the playbook and game tape on their own. Then they have family, faith, friends, financial, and other real-life commitments- and everyone likes them and wants to be near them because they are wealthy and famous. They are super busy!
And then there are constant, on-going demands for their time. Want to be on a weekly talk show (aka NY Jets quarterback, Aaron Rodgers)? Make sure you cut an hour or two of every week for that. Endorsements? Autograph shows? Dinner with your wife? Your kid’s basketball games? Team functions? Mailing back football cards kids send them to sign? Your college wanting you to come back to accept an award on an off-week during the season?
If it was signing one football, that would be one thing. But it is signing one football in addition to an overpacked schedule.
So how does football player busyness fit into rent increases in today’s world?
A landlord may be heard muttering, “If a tenant can’t come up with an extra 5-10% for rent every year, maybe they shouldn’t be in the property in the first place!”
If it was just $100.00/month extra for rent every year, that would be one thing. But rental increases are not happening in a vacuum. Tenants have been absorbing increased rents in addition to increased costs for almost everything else they consume. Food, gas, car prices, car insurance, plane fares, restaurants, NFL tickets (another 4% increase in ticket prices was just announced by the worst team in the league, Carolina Panthers), etc.. Netflix just went up by another $2.00/month, for goodness sakes! Like small papercuts that keep happening, the bloodletting becomes very real eventually.
Cumulativeness can be crushing!
Property managers and smart landlords need to balance potential rental increases with killing the golden goose. Good tenants are an asset that maintain the property and pay down the underlying debt. Dumping another increased expense on them can be detrimental to both parties, especially if the tenant moves and the property needs to be repaired and put on the market again.
Good news! The college and NFL players don’t hate your kid. If they had an iPad with lots of empty time slots and/or few other commitments, I’m sure they would happily sign footballs most every time! And if rental increases are measured, good tenants will be able to absorb them and continue to be a reliable monthly partner.
Happy Landlording!
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“100% Guarantee For Your Rental Home!” Delightful or Sour?
Tommy: Here’s how I see it. A guy puts a guarantee on the box ’cause he wants you to feel all warm and toasty inside.
Ted: Yeah, makes a man feel good.
Tommy: ‘Course it does. Ya think if you leave that box under your pillow at night, the Guarantee Fairy might come by and leave a quarter.
Ted: What’s your point?
Tommy Boy (1995)
My 9-year old son was eating frozen blueberries a few weeks ago and started to complain about them. “They’re so sour! Gross!”
I advised him, “Well, that’s too bad. You get some good ones, and you get some bad ones. It’s the way life goes…” Then I patted myself on the back for imparting some timeless, Forest Gump parenting advice.
Sometime later, he complained again- and then three or four other times after eating these blueberries. Finally, I grabbed the package off the table and saw it was the “Great Value” Wal-Mart brand. My eyes narrowed on the “Great Quality. Great Price. Guaranteed.” guarantee printed on the back. Verbatim, it read:
If for any reason you aren’t happy, we’ll replace it or return your money. Whichever you prefer. All of you need is the package. It’s that simple. Guaranteed.
Now was the time to teach my son about the advantage of paying attention and reading the fine print! “Son, we’re going to Wal-Mart and you’re going to take care of it.” “Dad, are you sure we can bring this package in and they’ll give us the money back? I’ve already eaten half of them…” “Yes, son. It’s that simple. Guaranteed!”
After my son negotiated that he could keep the $2.99 windfall and put it towards a pack of football cards, he signed on to this gambit. We drove over to Wal-Mart and, from a distance, I watched my son explain to the customer service person that the blueberries were sour and that he wanted a refund. After a minute or so, he walked away from the counter, defeated, and let me know that we could swap it out for another bag of (sour) blueberries; there was no option of getting football card money instead.
Now Dad was sure there was a misunderstanding! It’s guaranteed! It’s simple! And it’s a $2.99 charge to a multi-billion dollar conglomerate! Well, yours truly fared no better when I approached the customer service desk and was promptly (but nicely) shut down. If I didn’t have the receipt or credit card it was bought with, their hands were tied. There was nothing that could be done.
Undeterred, as my young kids trolled the Wal-Mart aisles unattended, I called the #800 number that was located under the guarantee. After a 14-minute phone call of providing serial numbers, date of purchase, and personal information, the customer service representative (who was also very nice) said that we would receive a $5.00 Wal-Mart gift card mailed to us within 2 weeks, but no cash. When we got home, I sent a message through the “Great Value Guarantee” website and they referred me to the in-store customer service desk for any refund requests. I wrote back saying that was where it all started! Then I never heard back. Ugh!
If for any reason you aren’t happy, we’ll replace it or return your money. Whichever you prefer. All of you need is the package. It’s that simple. Guaranteed.
The final scorecard read: (1) in-store visit, (1) 14-minute phone call, (1) web inquiry, & (1) 2-week wait for a $5.00 store credit. So, obviously, it’s not that simple. And it’s far from guaranteed. And we are talking about getting $2.99 back from Wal-Mart which they explicitly stated was a sure thing on the package itself.
Great story! But what’s your point? What does getting a cash refund for a sour bag of Great Value frozen blueberries have to do with property management?
A lot, actually. It’s about the danger of relying on corporate guarantees when picking vendors, especially in real estate. Whether it is for home warranty insurance against bigger ticket items breaking down (HVAC systems, roofing, appliances, etc.), costly property management occurrences (eviction, pet issues, etc.), or just getting money back from poor work (a flooring vendor recently), it is difficult to get companies to honor them. No company wants to pay (not even $2.99!) and there is always a reason why the guarantee doesn’t apply. It’s frustrating, (super) time-consuming, and borderline unethical at times.
But that doesn’t stop them from being ubiquitous:
- Home warranty companies: “If your HVAC system goes down and it can’t be fixed, we’ll buy you a new one! It’s so simple. Guaranteed!”
- Property management companies: “If there is an eviction or pet damage, we’ll cover the costs- It’s so simple! Guaranteed!”
- Wal-Mart: “If for any reason you aren’t happy, we’ll replace it or return your money. Whichever you prefer. All of you need is the package. It’s that simple. Guaranteed.”
Life is too short. The best bet is to pick a company that consistently offers quality blueberries instead of trying to be compensated on the backend when they are sour. Getting the $2.99 back is arduous at best, and unfortunately, usually fruitless. Be wary of upfront guarantees and concentrate more on established track records of excellence!
Happy Landlording!
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Ohio State Football Recruiting Similar to Great Tenant Selection?
“He has shown you, O mortal, what is good. And what does the LORD require of you? To act justly and to love mercy and to walk humbly with your God.”
(Micah 6:8)
“No Shoes, No Shirt, No Dice.”
Spicoli in Fast Times at Ridgemont High
Ohio State college football has been a dominant program for a long time. In the last 10 years, they have a record of 106 wins and 13 losses while winning 2 National Championships. This makes them one of the top programs in the country as they have set a standard of excellence few teams can match.
To have a perennially highly-successful football team, Ohio State has been able to get great players to come to their school; great players make great programs! But how does Ohio State determine what high school football players will actually become great college football players? What do players need to demonstrate?
Like every college football program, coaches will look at all the on-field performance measurables: how many yards, touchdowns, tackles, etc. each player had in high school. And then the physical measurables: how fast, big, agile, and strong each player is. And then there is mental aspect where players will take tests and answer questions showing off their “football IQ”.
These are all very important metrics and are heavily considered; the top recruits all grade very well on most or all of the criteria. But what gives players who measure out well in the criteria above the edge over one another? I remember reading something about that from former head coach Urban Meyer. He said that one of the most important things he looked at in recruiting was how the high school player played in the biggest games and versus nationally-ranked players in one-on-one match-ups; he was looking for what he considered true greatness. Did their performance ramp up to meet the challenge or was it pedestrian? Did most of the players noteworthy performances come against average teams or did their biggest, statistic-rich games come against the best players in the most high-profile games? Did they look forward to and excel in the most competitive situations and will their team to win? Coach Meyer believed that getting the types of players who had the ability to rachet their games up a notch was paramount to Ohio State winning national championships.
In property management, tenants are the big-time recruits! Landlords are looking for tenants who pay on time, maintain the rental homes well, and stay out of trouble. If landlords can secure great tenants, property management can be really easy! This is why great landlords spend considerable resources on tenant screening. We look at all the measurables of the “Big 4”:
- Employment & Income
- Past Landlord Reports
- Credit Check
- Criminal Background Check
Measurables tell most of the story and tenants who grade out highly in these areas can provide a solid program. But what about in situations when there are many tenants applying for one house? Who is the best one when all the measurables look good? Who is going to take care of the house? If some bad event happens, who is going to remain steady and still pay rent? Bottom line, how can great tenants be found?
These are tough questions. The right tenant roster can make or break a landlord. What to do?
I tend to pay extra attention to 2 things:
- Debt level (and the corresponding available credit): How extended is the tenant? Hard times: If there is a sudden job loss or car issue, can they absorb it?
- Past landlord reports: What did they think? Did they like the tenant or was the tenant difficult to deal with? How did the house look when they moved out? Would they rent to them again?
At the end of the day, Ohio State football and smart landlords are looking for great players. Great recruits win championships and profitably pay off rental houses. Pick wisely!
Happy Landlording!
Learn MoreDoes the “Rental Bible” Say That Evictions are the Unforgiveable Sin?
“…but whoever blasphemes against the Holy Spirit will never be forgiven; they are guilty of an eternal sin.”
Mark 3:29
“Do not be one who shakes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.”
Proverbs 22:26-27
Evictions are bad to have on the credit report in the rental home game; I won’t try to gloss over that fact! There is a reason that they are asked about on every rental application worth its salt. Landlords do not like to see a prior eviction come up on a prospective tenant’s dossier because it means that things got about as bad as they could get with the tenant’s former landlord. It typically means that the tenant did not pay, did something really against the rules, and/or would not move out of the house. No landlord wants to have a repeat performance; it’s a major red flag! We like peaceful, nice relationships…
Now, there are two sides to every story. The narratives that previously evicted tenants will tell are typically less confrontational:
My mom got really sick so I moved out of my place and into hers to help her. My roommate at the time stopped paying rent and my name was still on the lease so it happened.
I’ve never lived at that residence in my life! I have no idea what you’re talking about!
COVID happened. Enough said.
I co-signed a lease for my friend so he could get into the property. I guess he didn’t pay. I’ll need to ask him about that.
(Free advice: Please don’t co-sign for someone else. There is a reason they couldn’t get approved on their own. The Bible even cautions against it (see above)!)
It’s always some combination of best intentions paved with unforeseen adversity. And I don’t doubt that at all. But life is life and stuff happens and will happen again. Landlords just don’t want it to happen on their watch.
When a tenant doesn’t pay or follow the rules of the lease, experienced landlords will try to communicate and work with the tenant to get things in compliance. There is often give-and-take and patience required to right the ship. But sometimes the tenant either cannot or will not do what they signed up to do. When backed into this corner, there is one nuclear bomb that a property manager has- filing for eviction. And this bomb is not free. It takes a lot of human resources to see it through, it costs the owner money while rent is not coming in (cash flow double-whammy), and (when vacated) the rental house is usually left in deplorable condition. It’s the downside of real estate investment.
So when a prospective tenant claims that a landlord filed for eviction “by mistake” or “on the 2nd day of the month after I left for vacation when the check was still in the mail”, I’m skeptical. Filing for eviction is a last resort and one most landlords would not take lightly. The costs are just too high.
A “successful” eviction typically means that every rock was turned over, every resource for payment exhausted, and nothing could be settled outside of the courtroom. That’s not a good reference for a renter coming in.
So, is eviction the unforgiveable sin? Is it an automatic rental application denial?
It really can’t be. No matter how draconian the landlord, saying that a human being isn’t worthy of having a place to live is a tough line. Bad things do happen to good people. And many people use these awful experiences to change for the better. We all learn from struggles and hard times and need another chance.
However, we do say that not disclosing an eviction filing on the rental application when asked is an unforgiveable sin. If we don’t start from a position of honesty, I don’t think differences can be bridged to make a tenancy palatable.
To determine whether a previously evicted tenant has a path for approval, we try to focus more on the numbers and less on the story. The stories are usually compelling, but what do the facts look like? We try to investigate:
What does their current debt level look like?
What is the length of the current employment and its real income?
How long ago was the past eviction?
What do prior (non-evicting) landlords say?
Why are things different now?
How much cash do they have on hand to put down to mitigate risk?
So, no, the “Rental Bible” does not say that eviction is the unforgiveable sin. But it is a very real red flag! Prudent landlords will need to put in the research to determine if it is likely to reoccur in their rental homes.
Happy Landlording!
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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!
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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!
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Noah’s Ark & Real Estate Investing: Can You Persevere?
Noah’s ark is a crazy story. God tells Noah, some ordinary guy, that He is heartbroken with how sinful mankind has become and is going to flood the Earth and start again. He tells Noah that he is going to spare him, his family, and all the animals if he builds an ark. Noah takes God at His word and builds the ark, gathers the animals and provisions, and loads the ark up.
Everyone knows it rained for 40 days and 40 nights, but Noah and his crew were safe because they were floating on top of this massive amount of water. The lesser talked about part of this story is that they did not walk out of the ark on Day 41 ready to repopulate the Earth; there was way too much standing water (they were floating above mountains, for goodness sake!). They were actually stuck on the ark for over a year before it was sufficiently dry enough to get out on land and walk around.
The children’s Bible I was reading my son surmised that it wasn’t boring because they had so much to do. They had daily routines to feed and care for all the animals, put out fires (so to speak), and take care of themselves and the ark. Wash, rinse, repeat. If anything was neglected, there were problems. Survival for mankind and the animal kingdom was at stake and duties needed to be carried out diligently or there would be dire consequences. The carrot was that if they kept to the plan, they would be free of the confines of the ark at some point and the whole beautiful world would be waiting for them to enjoy.
It reminded me of real estate investing.
Like the ark, rental homes require constant diligence. They need to be fixed up, repaired, and maintained. Tenants need to be acquired, serviced, and replaced. The mortgage, insurance, and taxes need to be paid. The HOA and government entities need to be catered to. These duties need daily attention; if they are neglected, the financial boat can start taking on water and sinking can become a real possibility.
The carrot of real estate investing is owning the property someday. As it rains (roof needs replacing, tenant evictions, tenants not paying because of a pandemic), it seems like that day is far off. Sometimes it seems like it would be better to abandon the ark and swim without it.
But persevering and waiting for the ark door to finally open to dry land has its benefits. Free cash flow, a higher net worth, and assets that can be liquidated for college tuition or passed on to children are great financial prizes.
But tending the smelly animals is a pain day-after-day (ever try to pick up after 1,000’s of animals?). The lightning is scary. The boat rocks a lot and causes sleepless nights and sea sickness. Some boards on the ark look like they are breaking down. Drowning is a real possibility. Why did I get on this thing to begin with? My friends who stayed behind at least seemed merry before the torrential downpour.
However, amidst the doubts and setbacks… there is belief that one day in the future the sun will come out, the water will recede, and the dove will return with a leaf clenched firmly in its beak. The remaining mortgage payments will be made, the appraised home value will be high, and the financial statement will be solid. Landfall will make it all worth it.
Noah persevered and he and his family were rewarded. Hang in there!
Happy Landlording!
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Rental Outcomes: Don’t Bust The Guy Breaking Into Your Car?
It was a sunny Sunday afternoon and I was in my car with my kids to get some exercise in. I wanted to shoot some hoops, so I convinced my kids they did too. It was on.
We parked behind a local school and walked over to where the basketball court was on the other side of it; there was also a small playground 50 yards behind the court. My son and I wanted to play basketball. My daughter also initially wanted to play until she didn’t… then she wandered over to the playground.
It became a volley of walking from the basketball court to the playground and then back again. “Dad! Come see this!” “Dad! Over here!”
On my sixth trip back to the playground, I realized that if I walked far enough into the playground, I could get the sight view past the school to see my car in the distance (which was completely obscured from the basketball court). And I saw a strange man walking suspiciously around my car. I say “suspiciously” because there were no other cars there. What was he doing? He was looking into my windows and did not know he was being watched. How suspenseful! And what to do?
I went through the options. I could yell and let him know I saw him. That would probably prevent any theft or damage to my car. Yawn & boring.
Or I could go (undetected) back to the basketball courts, stash my kids in the bushes, and then sneak around to potentially catch the stranger breaking into my car. Once he broke glass, I could ambush and subdue him; in a perfect world, I could handcuff him with the zip ties in the back of my car. Then I could call 911 and the Charlotte Observer letting them know that a “local hero” had one criminal on ice waiting for them- no charge.
That would be awesome unless… the stranger was bigger than me, good at fighting, and also included kidnapping as part of his criminal repertoire. Then he might drive away in my car with my kids, and leave me bleeding on the pavement. That would be a major fail and one that would be difficult to explain to my wife.
Seriously, what outcome did I want? Though the hero thing sounded pretty good, I needed to get real for a minute. Despite the appeal of potentially getting a key to the city from Mayor Lyles, what was going to be the cost? Realistically, if all went close to best-case scenario (which it rarely does), I’d have a busted car window (that I’d have to pay for and deal with), be waiting a while for the cops to show up (with my knee in a guy’s back who is probably cussing me out), and be babysitting two young children at the same time. That did not seem like a great outcome, even with the best-case scenario.
To me, property management is about creating good outcomes for our clients; the best outcomes come from tenants who stick around a while and consistently:
- Pay the rent
- Maintain the property
- Get along with their neighbors
We recently got a call from the HOA of one of our condo units where they accused our tenants of unkempt living, namely having a unit so disgusting that bugs where infiltrating the homes of neighboring tenants. This was clearly a violation of #2 and #3 above. This was not good, if it was true. They wanted us to evict the tenants immediately (and if we didn’t, they were sending a Sheriff that night to do so).
Despite the sheer illegality and impracticality of such a threat (landlords wish it was this easy to evict bad tenants- “oh, just call the local Sheriff and have him go over the same day to remove them…”), what outcome did we really want? Did we want to remove paying tenants who never had any prior issues? Of course not. We wanted the tenants to correct any cleanliness issues, if applicable, and then continue to stay and pay rent.
So we contacted the tenants and explained what the HOA alleged. Then we let them know we’d be there for an inspection the next afternoon to ensure the HOA there was no issue. The tenants understood and said there was no problem with that.
The next day, our inspection showed a very clean unit. We thanked the tenants and reported the findings to the HOA. There haven’t been any issues since.
The desired outcome was to keep the tenants, not to try to play “gotcha” to catch them violating the lease. That would put ourselves in a position where we would need to make a decision that no one wanted to make- the costly removal of paying tenants.
Viewing issues from a desired outcome perspective, as opposed to the initial bravado impulse, can help make decision-making more clear. It may be “boring”, but “boring” property management is typically the most effective and keeps the checks coming.
Postscript: So I yelled something at the guy at my car and he left. My son hit some shots, my daughter hit the swings, and then we left (unscathed) in a non-damaged car. Yawn…
Happy Landlording!
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COVID-19 Rent Collections: OK to Say “I Don’t Know”?
“Dewey Defeats Truman”
Chicago Daily Tribune headline on 11/3/48
“Even fools are thought wise if they keep silent, and discerning if they hold their tongues.”
Proverbs 17:28
My 6-year old son is tasked with completing school assessment tests this week on the computer. It’s a stressful time for him! Not only does he have to deal with new questions about numbers and words, he has to figure out how to use a mouse for the first time. It’s a lot for a new, aspirant student.
My wife thinks some of the questions may be out of the scope of a Kindergarten-educated child. “Three-digit subtraction questions? Scandalous! How could he know such things at this point?”
So he’s tackling an assessment question like:
Q. What is 100 – 80?
- 35
- 20
- I don’t know!
- I really don’t know! (Can I watch TV now?)
The truthful answers for him are clearly 3 or 4 (with a hard lean on 4). But for us educated folk who have been taking tests all our lives, we know at minimum we need to answer 1 or 2. Nobody gets any points for offering “I don’t know” on a test! We only get points for knowing (or acting like we know and guessing correctly). But we really should know stuff, right?
Or maybe that’s the limitation with tests when we implement this methodology in real life. With tests, there’s always one right answer that is evident if the data is studied and understood. But reality can be very different.
For example, take this COVID-19 situation for property managers. We’re asked questions from clients like, “Do you expect tenants to pay rent next month?” Or, more directly, “Will my tenants pay rent next month?” As someone in the property management field for the past 16 years, I should be able to answer that question, right?
Well, I read the same articles that everyone else did with statistics from large apartment provider associations saying 33% of tenants didn’t expect to be able to make their rental payments this summer. Wow! 1 in 3, that’s bad. Then I received calls from a few of our tenants telling me about their job losses and wondering if any of our owner-clients would be offering “Free Rent” until things were back to normal. Data was not promising, both empirically and anecdotally.
All of this must have meant that we were going to experience some rough times with the rental properties we manage in the Charlotte-Metro area, right? So I jotted off letters every month this summer to our owner-clients telling them to expect some rental disruption. I thought I knew what was going to happen and then I relayed this to our clients.
So what happened? Everyone this entire summer paid (with the exception of literally 1 tenant who is moving out). And the number of late paying tenants was half of what we usually have.
What do I know?
What is 100 – 80? Fortunately, I can help with that one. But are tenants going to continue paying on time and in full next month? I really don’t know. (But I hope so!)
Happy Landlording!
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