When I was a college student, I never knew any of my landlords — they were never around so how could I meet them!?! All I remember thinking was, whoever they are, they’re probably damn wealthy and even bigger cheapskates. I’m sure this line of thinking doesn’t deviate much from what most people think of their overlords. It’s hard not to when you’re the one paying an exorbitant amount of rent each month to live in a rundown old shack!
Now that I’ve crossed over to the “dark side”, I’m starting to see things from a different perspective. I communicate with many other investors, which is funny since these people are the very same overlords I used to resent. From the landlord’s perspective, it’s the tenants who are the one’s making life difficult for everyone. You see, tenants are lazy, unmotivated people who like to gripe about every little small thing. They pay rent late, destroy the place, and can’t even handle basic responsibilities. Because of them, the landlord has to suffer and earn a cut of ONLY 20% annualized return on investment. Tenants should just be grateful we aren’t raising rents more often than once a year!
Think Different… Be Different
Whoah, did I just say “we”? Maybe I have crossed over…
But wait a minute. Things don’t have to be so black and white do they? Why can’t we all just get along? Why can’t we be friends?
I’ve always believed that if you want to get different results, you must do things differently. In order to do things differently, you must also think differently. When I first became a landlord last year, my first thought was, “what have I just gotten myself into?” Once I got over that hurdle, I put together a list of how I expected a good tenant to behave.
Here is my ideal tenant:
- Dependable. Pays rent on time every month.
- Self sufficient. Doesn’t ring me for every little problem. Only contacts me when necessary.
- Pride of “ownership”. Takes care of the place and treats it like their own.
- Honest. Follows the rules and regulations as outlined in the contract.
- Respectful. Doesn’t make any major decisions without consulting with me first.
- Non-transient. Has a desire to stay long term.
The above is what I’m after. I want all my tenants to be just like that.
But so does every other landlord out there…
The question is, what are you willing to do to ensure that you get such a tenant? You can’t ask for the world if you aren’t willing to meet someone half way! How do you keep a quality tenant if you yourself are an asshole? Be honest and open. If you were renting out a new place, what would you expect from your landlord?
Here’s what I expect from any decent landlord:
- Reachable. Give me your contact information and respond promptly to my messages. Don’t treat me like my concerns don’t matter.
- Takes action. Don’t just say you’ll get it fixed. Actually go out there and fix it yourself or hire someone competent to do it.
- Fair. Don’t raise my rent every year if you don’t perform any upgrades or improvements to the place.
- Not cutthroat. Don’t start the eviction process as soon as I miss one month’s rent. At least talk to me first to see what actually happened to cause the missed payment before you start processing the paperwork.
- Adequate quality. I’m not expecting to live in the Taj Mahal but I need something half way decent. Building needs to be up to code. All appliances, electrical, plumbing, etc. need to work.
This is Different!
And that’s just the basic requirements for a decent landlord… which I’m guessing at least 50% fail at. But what if we desire more than being just average? What if we want to be in the top 1% (who still makes a decent return at the end of the day)? After all, we are after the highest quality tenants out there. What more do we have to do to stand out?
Provide turnkey ready properties:
Turnkey doesn’t have to imply expensive. It just means the surroundings pop and the quality attracts the eye. For Rental Property #2, I furnished the place with stainless steel appliances and granite countertops. Sure, I could have saved a few hundred bucks and gone with cheaper alternatives, but I believe the extra costs were justified. I’m willing to bet that if you furnish the place nicely, the tenant will take better care of it. You set the standards for your properties, so make sure to set them sky high! If you provide your tenants with quality units at affordable prices, why wouldn’t they want to stay? Also, the extra eye candy will likely increase the value of your property.
Rental Property #1:
Rental Property #2:
Rental Property #3:
Fight for your tenants rights:
HOA is always giving me a hard time and complaining about something. Each time it happens, a tenant will text me or call me, and they usually feel horrible about it. I generally tell them to relax and let them know that I’m on their side. I’ve got their back, and I simply say, “Don’t worry. I’ll handle it and take care of HOA for you.” It’s as easy as that. And I make sure to follow through and get the matter resolved ASAP. By doing so, my tenants (so far) have been very good about alerting me about any potential trouble ahead of time. I usually find out about the issue from the tenant before HOA sends me a nasty written letter.
Appreciate your tenants:
As investors, we are all in the business of investing to make money. When it comes to landlording, you must not lose sight that your tenants are people too and they deserve to be treated well. I’m not as bloodthirsty as some others, and I genuinely appreciate every tenant I have who is living in one of my properties.
Bottom line, they are paying for all of my mortgage, property taxes, insurance, etc. Even after all that, I’m still pocketing money every month. Over the long haul, they are the ones making me wealthy by paying off my properties. So, it’s definitely in my best interest to be grateful to these people. I try and do something special for each tenant each year. Last year, I sent out $100 gift cards during the holiday season. Small gestures can leave large impressions. I’ll probably do something similar again this year.
Yes, I hear you. Costs, costs, costs. What about the bottom line!?! You know what, $100/year for each tenant is a SMALL price to pay to keep your vacancy rate at ZERO percent. You think $100 is a lot? Try going through a month where the property sits vacant. That’ll hurt! Also, don’t forget about the time and money saved not having to advertise, do background checks, credit checks, employment history checks, new lease agreement, etc.
Be willing to make repairs:
If you treat your tenants right, they probably won’t keep hassling you to fix something. But when they do, make sure you do it right, and fix it promptly. They will appreciate your efforts.
Don’t raise rents every year:
Many landlords make it a habit to increase rents every year. I say buy right, and you won’t have to. My cash flow from each property is great, so I am in no hurry to jack up prices. I don’t think many landlords realize how much stress rent increases can place on a tenant. It’s a huge burden, and psychologically damaging. I’ve never met a tenant who didn’t grumble and was in a bad mood upon learning about their rent being raised. I try and stay clear of that. If my tenants get pay increases from work, I want to them to hang on to that. If they’re happy, they’ll stress less and probably take better care of my properties. I don’t believe that the best way to make money is always through the direct means.
Experiences so far
I’m doing my best to be a great landlord. I’m trying to get in the top 1%. I continue to learn and look for ways to improve on a daily basis. So far, the results have been tremendous. My tenants are all high quality, and are even exceeding my expectations. I recently spoke to tenant #1 on the phone, and let her know her lease was expiring. Before she could get a word in, I declared that we could renew the lease for another year, at the same rate. No rent increase, even though rents have skyrocketed in the Bay Area. She sounded ecstatic (perhaps she was worried I would mandate an increase), and told me how happy she was living there. She was glad to stay.
That brought a smile to my face. I was happy too. And that’s the number 1 reason why I got into landlording — I want to be able to make a positive difference in the lives of other people. No other form of investment allows for this same direct opportunity.
This is the human experience. I’m a landlord… and it’s been a joy so far!
What’s your story? How do you approach landlording? Are you a tenant? If so, what does a landlord need to do to ensure you stay?