Operating rental properties and dealing with your tenants are not separate jobs. The fact is, they’re inseparable parts of landlording. I owe a great deal of my real estate success to my landlording abilities. Some folks disagree with me on this issue — They argue that professional property managers are paid a decent percentage of the gross rental income to relieve owners of this thankless task. I’ve known many folks who ended up relieved of their property instead! Now the good news — Landlording is a profession that can help you to achieve financial independence and a quality of life second to none if you choose to learn it well. A long-time investor friend of mine says it like this — “If you are comfortable with the role of ownership and management, and do not allow yourself to be intimidated by the responsibility for setting down the rules by which tenants may live in your properties, you will find as many others have — That owning and operating small rental properties can provide a vehicle for self-employment and sense of freedom that’s difficult to match in our society today.”
Besides making money, being a successful landlord provides many sought-after personal benefits. For example: you can have a better quality of life for yourself and your family. You can live anywhere you choose and set your own work schedule. You can spend additional time with your hobbies and do those personal things that never get done when you work for someone else. Being your own boss is the envy of every W -2 wage earner. Almost everyone dreams of making a big money working for themselves.
A 10% JOB CONTROLS 100% OF THE INCOME
I know many small-time property owners who consistently earn $100 per hour or more operatin their own income properties. Landlording is a major ingredient for making big bucks for the do-it-yourself investor. Owners I know many small-time property owners who consistently earn $100 per hour or more operating their own of small income properties who don’t bother learning the landlording part often throwaway a fortune because they allow the tenants to run their business and control their buildings. That’s a very unwise decision for property owners. Folks who have heard me lecture or attended my landlording seminars already know I consider landlording and people management the $10 job that earns me $90. Those numbers come from the fact that I charge 10% for managing properties. Naturally when you manage your own properties, you can’t pay yourself – but saving 10% is almost like earning it! Many small-time “Mom & Pop” investors pass up the opportunity to earn a lot more money with their investments simply because they fail to see the importance of learning to become a skilled landlord. You don’t become a skilled landlord because you acquire houses. You only become the owner. Skilled landlording will require both education and practice. Basically there’s only two ways to learn landlording! You can learn from people like me who have many years of experience – or you can learn from your tenants! I can tell you right now if you were to pay me 10 times more than I charge for seminars – it’s still much cheaper than learning the job from your tenants. Every landlord should know and understand the landlord-tenant laws for his particular state. Once you know and understand the laws, your fear of tenants (being intimidated) will vanish. An overwhelming number of property owners incorrectly assume these laws favor deadbeat tenants. I will assure you this is not the case, although sometimes it may appear that way! Laws are mostly about equity. It’s well to remember — There are unscrupulous landlords same as naughty tenants!
PERSONAL CONTROL KEY TO SUCCESS
I can tell you from my experiences that many small-time real estate owners fail too often because they don’t see the need to learn about landlording. Almost all investors I deal with are owners of houses and small apartment buildings. All can benefit. Even if your basic investment strategy is to buy and sell – tenant’s will generally be involved in the process. Tenants can make or break a property. Owners who pay little attention to landlording skills are basically allowing property managers – or their tenants to have control over their investment dollars. I will assure you based on my own personal experiences — Dumb landlords are absolutely no match for the liberated “Rock-N-Roll” tenants today. You gotta know your stuff now because the tenants know theirs. Never lose sight of this important economic fact — Tenants are the life blood for landlords. Tenants are the owner’s customers. Almost every profitable business has customers. Tenants are the most important part of owning and operating rental properties because they supply the money. Obviously a landlord’s problem would be down-right serious if he or she did not have tenants who can pay timely rents. One of the major advantages that small operators have over limited partnerships or syndications is the personal involvement. Owners who are personally involved are much more sensitive to what is going on at their properties. They can act quickly when the need arises. There’s no front office approvals, no voting, and no “red tape” or politics. It’s strictly a single party control. Eventually, you’ll begin to understand why complete, control – or as complete as possible is a most important part of making big money with real estate. In the meantime, you’ll just have to take my word for it.
ALWAYS TAKE CARE OF TENANT BUSINESS PROMTLY
Good landlords always act first – as opposed to re-acting later! Don’t fight and argue with your tenants anymore than you would fight and argue with your boss over the work requirements at your job. Obviously discussions are fine, but fairness must always prevail. Landlords are the boss of houses. They make the rules for the tenants who live there. Never compromise on the issue of WHO’S IN CHARGE. When tenants get the upper hand while living in your rental properties – you’ve got some serious problems. How would I know this, you ask? At least half the properties I own today were purchased from extremely motivated sellers who wanted more than anything else to get away from their tenants. I made that possible for them but at a greatly reduced price of course! Most beginners don’t fully understand the true dollar value of learning to be a good landlord. As you may have guessed by now — It’s very serious business. Not only does it involve the daily management of your tenants – but it also has a great deal to do with your long-range real estate profits. Landlords who learn to act before small problems become big ones – will control most tenants. This strategy works very well collecting rents – also, enforcing your tenant rules. Speaking of rules; many landlords have far too many rules! It’s best to keep your list of rules short and enforceable, rather than long-winded, without any teeth.
FAIRNESS SHOULD BE YOUR GOAL, BEING POPULAR IS NOT
One of the most important questions all landlords should ask themselves is — What would I rather be popular or profitable? Don’t let your mind wander here! You don’t have to be a greedy tight-wad or steal candy from babies to become a wealthy landlord! What you must be, however, is a fair-minded business person. Fair-minded business means that accounts receivable (rents) are collected in a timely manner and that your business assets (HOUSES) are maintained properly by you and the tenants who lease them. See how simple this stuff is! Collecting the rents should be your proudest moment! It means you selected a tenant who can pay you! Collecting your money is first priority and you need never defend the reasons why! Many new landlordowners feel they must explain to their tenant why they need the rent money! Have you ever heard the supermarket manager drop by the check-out register to explain to you why he must be paid for his groceries? Sounds silly – but many landlords still feel they must do it! Landlords will not be hated or disliked anymore than the supermarket cashiers or bank tellers when they demand timely rents. Everyone knows that cashiers will not allow groceries to leave the store until they collect the money. Customers expect this and they don’t feel hateful toward cashiers or bank tellers for following the rules! Landlords who insist on timely rent payments are no different than cashiers in the supermarket!
ALWAYS BE FAIR BUT DON’T GIVE THE RANCH AWAY
Several years after I became a “Full-Fledged” landlord, I found myself trying extra hard to make my tenants happy to live in my houses. I didn’t realize it then, but this won’t likely happen! It seemed -the more I tried to please, the more my tenants wanted from me! For example, some tenants who rented my economy units that didn’t have carpets in every room (several of my least expensive houses have carpets in only the living room) started asking for carpets in the bedrooms too. However, none of these conversations included any mention of paying extra rents. Several of these requests involve considerable expense. Tenants would sometimes ask for rear yard fences where none existed when they moved in. What generally happened – they would acquire a dog or decide to babysit small children in the backyard for added income. Don’t misunderstand what I’m saying here — I’m very much in favor of rear yard fences, front ones too for that matter. But what’s missing in all of these requests is “CONSIDERATION’. That’s the contract term for the money. The question arises – who should pay for these special add-on requests? I agree that houses without carpets are like cheeseburgers without fries. But as you probably already know — Burger King charges extra for fries – and so do I if you want more carpeting or a rear yard fence.
As the owner-landlord, it’s your business to see that rents are collected and that rules and regulations set forth in your rental AGREEMENT/CONTRACT are followed and obeyed. You must never allow a tenant to intimidate you! It will almost always lead to poor landlord decisions. I believe the most serious mistake the new landlords can make is to allow a tenant’s urgency to become their urgency. Let me explain this a little better so you don’t think I’m a cold-hearted monster-landlord!
COMMONSENSE SHOULD ALWAYS PREVAIL
After many years of responding to various tenant call-outs, I’m hard-pressed to think of any situation so compelling that I wouldn’t have enough time to think it through! If a water pipe breaks, certainly I’ll act quickly, but I’ll still plan what I need to do. If there’s a fire at my property, the community fire department will handle everything. As for me, I’m protected by my insurance policy on the building. Should someone die in one of my rental houses, what could I possibly do? I’ve yet to meet a landlord who’d be of much help standing over a dead tenant. The county coroner is the person you need the most! In short: leaky pipes burned down houses and expired tenants are no more urgent to a landlord than dying patients are to a doctor – or raging fires are to a fireman. People will die on the doctor’s table everyday and you can’t listen to the evening news without hearing about another fire in the neighborhood. These are everyday events we deal with. Pipes will always be springing a leak, people die everyday – and of course, buildings will burn to the ground. That’s just normal management stuff! Your job as the landlord is to be as responsive to your tenants as you possibly can. But, never should you allow yourself to be stampeded into rushed decisions simply because your tenant says you should! In short, don’t allow your tenant’s urgency to become yours. Do not take what I just said the wrong way — You must always give the best service you possible can and treat your tenants fairly. In fact, at my seminars and in my training materials I recommend investors use my 60/40 RULE. What it means is – I try and give my tenants 60% of my efforts and assistance in exchange for only 40% from them. Here’s the way I see it. My tenants are making me a wealthy man! I buy real estate they pay for it. I take expensive trips, they pay my bills. I drive expensive cars and live in an expensive house – and again, they pay all my bills. Without my tenants, I wouldn’t own very much real estate, my trips would be a whole lot shorter and I’d likely be living in a house much like the ones I rent. I don’t believe 60/40 is too much to give, do you? Landlords often find themselves in serious “hot water” with tenants because they try to force too much logic and commonsense into managing their tenants. Logic and common sense have their place alright, but they seldom count for much where lots of restrictive rules are involved. For example~ it is nearly impossible to effectively force your own personal living standards – or ideals on your tenants – a very common mistake for many new landlords. I would seriously advise any owner-landlord to think about what I’m telling you here, because it has a great deal to do with sanity — YOUR SANITY. What earthly good would it do you to make a million dollars from your rental properties if your tenants drive you to the “nut house”? My advice – stay away from them as much as possible and when temptation becomes more than you can bear – pray for them instead. Save your sanity – you’ll need it for collecting rents. You don’ have to agree with me about any of this. You don’t even have to like it — Just keep an open mind. Someday if we meet, you may even thank me for the help. Hands-on operators, the do-it-yourselfers, can put the big guys to shame in terms of building net worth. Call it tender loving care if you wish or whatever name you choose – just try it ’cause it works! There is indeed a great deal of truth to that old Chinese proverb which says — “The best fertilizer in the world comes from the owner’s shadow.”