This article was posted on Saturday, Nov 01, 2014

I often refer to landlording and managing as the 10% job that earns the other 90% of every rent dollar I collect!  I have always charged 10% to manage properties, although I only do it for myself nowadays.  I might just add, however; I’d be more than happy to pay any professional manager 10% of my gross rents to operate my properties the same way I do.  The problem is – no manager will ever provide the same tender loving care and the quick response to problems like I do!  Whoever pays the bills is always the most concerned!  That’s why it’s so important for do-it-yourself investors to learn how to manage and do it for themselves, at least in the beginning stage of investing.

Managing people is a difficult job!  Managing people who are also your tenants and have an obligation to pay you their hard-earned rent dollars every month can be particularly challenging to your sanity!  Ask anyone – what’s the worst thing about owning rental houses?  Most will tell you without even blinking an eye – it’s the tenants “Dummy”!  Even folks who don’t own real estate will give you the same answer.  It seems quite clear that property owners who wish to survive very long in the investment business, and who expect to make any serious money while they’re doing it are well advised to learn the management job right from the “git-go”! 

Learning the Landlord Business Pays Dividends

No one is born with all the skills necessary to be a good landlord!  At my seminars I often ask the group if anyone would agree to have heart surgery performed by a physician who had only read a book or two on the subject!  I’m sure you know the answer – yet this same thing happens to tenants all the time!  Investors acquire properties and suddenly they’re in charge of people who live there!  They have no training whatsoever – and in many cases, they haven’t even read a book on the subject.  Many new investors start out having tenant problems and they often get worse till something serious happens.  It’s no wonder there’s so many landlord horror stories floating around.

I just love swappin’ landlord stories!  They remind me of oatmeal – they keep getting bigger as they’re cooked up, and they always reach their most fevered pitch at cocktail parties!  Everyone’s got a landlord horror story it seems, whether they own any properties or not!  If you happen to be a new investor, simply sit back and enjoy the humor like I do – but you should always consider the source.  Don’t let “doom & gloom” landlording tales keep you from investing the way you should if you wish to achieve your financial goals with real estate.  Will Rogers once explained it this way:  “The problem with so many people today is not that they don’t know very much.  It’s just that so much of what they know just ain’t so!”  Sounds like Will knew something about landlording! 

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Getting Rich Requires Right Recipe

Enough about landlording stories – let’s talk about money strategies and investing your hard-earned dollars in long-term properties like I recommend.  To begin with – it’s your tenants who will make you rich!  Property re-sales or flipping will merely put some extra spending money in your pocket at best!  You needn’t take my word on this – just check around!  Almost everyone I talk to about this subject always winds up telling me something like – I should’ve never sold, or I just wish I knew back then what I know today!  Some even fib a little bit – by saying:  “If I hadn’t needed the cash so bad, I would have never sold my rental houses.”  For some strange reason, the same folks who tell me they agree with my long-term investing strategy are the ones who sell the quickest when they smell a fast buck!

Right off the bat, some of you are probably thinking to yourself – what’s with this Fixer Jay guy?  Every four or five months he wastes a whole article rambling on like “wolf creek” about the benefits of being a good landlord.  Frankly, I say YUK!  Doesn’t he understand that landlording is the very reason I sign up for all the flipper seminars?  My mama didn’t raise me to grow up to be a cowboy or worse yet, a landlord!  I don’t think Jay quite sees the big picture – landlording’s just not very fashionable today!  And it damn sure ain’t cool –besides, chasin’ tenants around is way too much work!

Certainly, I’ll be the first to agree that lots of weird stuff can happen to landlords who manage the folks living in their properties.  Yet, I want you to understand, if you’re totally honest about achieving your long-term financial goals – there’s almost no way to avoid being a landlord.  It’s nearly impossible to hang on to wealth over any reasonable period of time if you don’t keep the properties that earn the money.  Simply stated, when you sell a property, you forfeit far too many benefits – and that’s not the path to wealth.  Remember it’s the benefits that have everything to do with building wealth and achieving your financial goals. 

Landlording Can Make You a Wealthy Investor

Managing the people who live in your houses is a very small price to pay for financial independence.  Once you begin acquiring properties the right way – by structuring your transactions so that there’s money left over every month for you, you’ll quickly discover as I did, you’ll be under no pressure to sell!  Most investors who flip properties accumulate huge stacks of bills during the holding period – thus creating a real urgency to sell so they can pay off their overloaded credit cards!

As many of you know, landlording skills are a very important and necessary part of my long-term wealth building strategy.  I consider my landlording talents far more valuable than my negotiating skills or even the financing techniques I use to acquire properties in the first place.  Let me explain why.  Tenants pay all my bills and support my independent lifestyle – and that’sjust for starters!  I also expect them to pay for all my real estate holdings, plus the maintenance and repairs to keep my properties in good condition.  They pay for my personal residence (much fancier than theirs) and even my car, which I use to keep an eye on them to make sure they follow my landlording rules.  Finally, after everything’s said and done – I own all thedeeds and they have only the memories and rent receipts.  In all fairness I’d say that learning how to be a good landlord is a small price to pay for all the benefits I’ve received.

Owning investment properties and managing the tenants are not separate jobs.  In fact, they’re inseparable parts of investing in my view!  I owe my real estate success to my landlording abilities.  Some folks don’t agree withme on this issue.  They argue that professional property managers get paid a respectable percentage of the gross rental income to relieve owners of this thankless task.  So what’s the BIG DEAL, they ask? 

Proprietorship is the “big deal”. No one shares the same level of motivation as the owners do.  Don’t forget, its owners who borrow money against their homes for financing.  It’s owners who invest their entire life savings trying to make a better life for themselves and their families.  It’squite obvious; owners have a much greater interest in their own success thananyone else.  That’s what proprietorship is all about.  Management fees paid to others simply can’t buy it.  Allow me to explain why!

Try to picture if you can, your professional property manager receiving a telephone repair call Sunday afternoon, to fix the handle on Heidi’s toilet.  Nothing serious mind you – the stupid handle just broke off and the plastic lever fell down inside the tank.  You can see the flapper chain down there in a coil like a snake on the bottom of the tank.  It’s easy to fix, but still, Heidi and the kids can’t flush.  To make matters worse, all the grandkids are over visiting on Sundays too!  She needs help right now or she’ll never speak to the owner again!  Let’s pretend that’s you!  I’ll make you a small wager and give 10 to one odds, if Heidi’s toilet ever flushes before Monday morning, it’ll be you the owner who goes over to fix it.  That’s proprietorship my friends and you just can’t buy it!

My point here, if you collect rent for Sundays, you must also arrange for toilets to flush on Sundays too.  Like I said earlier, giving good service is what makes any business prosper!  You might call it plain ol’ common horse sense.  Proprietorship is an absolute essential ingredient, especially for new investors who are just starting out.  Professional managers might be alright later on, but any business always takes plenty of tender-loving care in the beginning!  That includes investor-landlords! 

He Who Profits Must Be Responsible

Good landlords should always ACTand not simply react.  Never fight and argue with tenants who are renting your houses.  You’re the owner, you set the terms and you make the rules!  Obviously, discussions are just fine, but fairness must always prevail.  Landlords are the boss, so they must establish the rules for the tenants who live there.  Never compromise on the issue of who’s in charge.  When tenants are allowed to have the upper hand while living in your rental properties, you’ll have serious problems.

In case you’re wondering how I know this!  At least half of the properties I own today were purchased from highly motivated sellers who wanted more than anything else to get away from their tenants.  I made it possible for them to do that, but at my price of course.

Most beginners don’t fully understand the real value of learning to be a good landlord.  As you may have gathered by now, I consider it to be a very important business.  Not only does it involve the daily management of your tenants, but it also has a great deal to do with your overall real estate profits.  Nice looking, well-managed rental properties sell for 25-40% more than pig-stye properties run by the tenants who live there.

Hands-on operators, the Mom & Pop, do-it-yourselfers, can put the big guys to shame in terms of generating more cash flow.  Call it tender loving care if you wish, but owners often work for pennies and handle repairs on weekends to make their properties successful!  There’s a great deal of truth in that old Chinese proverb which says:  “THE BEST FERTILIZER IN THE WORLD COMES FROM THE OWNER’S SHADOW.”

Landlords who learn to act before small problems become big will control most tenants.  This strategy works very well for collecting rents as well as 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.  One of the most important questions all landlords should ask themselves is:  What would I rather be – popular or profitable? 

on’t let your mind wander here!  You don’t have to be an unscrupulous landlord or steal candy from babies to become a wealthy investor!  What you must be is a good business person.  Good business means that accounts receivable (rents) are collected in a timely manner and that your assets (houses) are maintained properly by tenants who lease them.  Perhaps the best way to treat your tenants is the way you’d like to be treated if you were the tenant.  Don’t make promises you can’t keep and don’t make your tenants call over and over to get repairs done.  No business will survive very long providing lousy service.  You must never forget, tenants are a landlord’s customers.  Treat ‘em like you appreciate their business because you should! 

Landlords Are Not Hated For Collecting Rents

You should never feel intimidated or apologetic about insisting on timely rent payments.  Landlords won’t be disliked or hated any more than supermarket cashiers when they demand timely rent payments.  Everyone knows that cashiers won’t allow groceries to leave the store until they collect the money.  Customers expect that and they don’t feel hateful toward cashiers for simply following the rules!  Landlords who insist on timely rent payments are no different than cashiers!  Most collection problems arise because landlords are “wishy-washy”!  Don’t confuse this with being big-hearted or charitable. 

Make no mistake here, wishy-washy landlords want their rents like every landlord, but their problem is – they haven’t learned what to do to enforce collection, so they accept “Mickey-Mouse” excuses instead.  If any landlord wishes to test what I’m saying here about being big-hearted and charitable, try this little exercise!  First, I want you to collect the rent in person, in cash, when your tenant agrees to pay you.  Next, write out a paid receipt for the rent and hand it to your tenant.  Finally, after you’ve counted the money, put it in your pocket and given your tenant his rent receipt – reach down in your pocket for the money and give it all back to your tenant.  Now, that’s real genuine charity!  You can feel the love?

There is absolutely no need to suffer from tenant abuse!  In most cases, I’ve discovered that landlord incompetency is to blame more than anything else.  It takes more than ownership to be an effective landlord.  It’s my guess that amateur landlords cause nearly as many problems for themselves as their renters do.  Income property owners who don’t learn anything about supervising tenants or landlording responsibilities are in about the same situation as a man who buys an airplane but doesn’t think he needs flying lessons.  In either case, a crash is inevitable.

State eviction laws are rules of the game for landlords and tenants.  Owners, who are not familiar with these laws from start to finish, are likely to become victims should their tenants decide not to pay.  Landlords and/or property managers must be in a position to “jump in” and act quickly when their income is threatened, otherwise they’re throwing away their hard earned money needlessly.


Don’t Bother Asking Dumb Questions

To me, the dumbest question in the world for any landlord to ask his tenants – “Where’s the rent money?”  It’s a dumb question because both parties already know the answer.  The landlord knows the tenant hasn’t paid yet, and the tenant knows that’s exactly why the landlord doesn’t’ have it!  Any question where both parties already know the answer is simply a form of harassment! Asking can also encourage your tenant to tell you a little white lie! 

When the only value a question has is to harass, it shouldn’t be asked!  Harassing tenants is not a good management technique.  It’s far more effective for landlords to simply issue a PAY OR QUIT NOTICE when they don’t receive rents when they’re due.  After all, if your tenant expects to be late with his rent payment, then it’s up to the tenant to obtain permission and work out an acceptable solution with you, the landlord.  Property owners who chase around after their rents are generally wasting a lot of time.  They need a better strategy – or perhaps, better tenants.

Based on my personal experiences, I can assure you that dumb landlords are absolutely no match for the “Rock-N-Roll” tenants of today.  You gotta know your stuff today because a lot more tenants know theirs.  You must never lose sight of this very important fact — Tenants are the life blood for any landlord.  Tenants are a landlord’s customers!  Almost every profitable business needs paying customers to survive.  This means your tenants are a necessary and vital part of owning and operating rental properties because they supply the money.  Obviously, a landlord’s problems would be more than serious if he or she didn’t have tenants to pay all the monthly bills. 

Over many years I’ve observed all different kinds of investment schemes designed to avoid having tenants living on the property!  Flippers claim they’re messy and they get in the way of making any real money.  If you follow that reasoning, there should somehow be a substantial group of millionaire flippers today.  Perhaps I don’t get around too much, but I’ve yet to find any myself.  On the flip side, I can show you a pretty long list of landlord-investors who have reached millionaire status.  Selling versus holding is not even a close call if your goal is to become a wealthy real estate tycoon!  The problem of course, is like I’ve already told you!  You’ll need to have year ‘round tenants to pay all your bills, and you’ll have to learn landlording so you know how to collect the rents!   

Jay P. DeCima, aka Fixer Jay, lives in Northern California where he operates multiple rental properties.  With nearly 50 years’ experience, he’s a street-wise landlord and best-selling real estate author. Investors are invited to download Fixer Jay’s informative eBook, LIVING THE DREAM at  Jay’s latest book; “The Real Estate Fisherman” (due out) early 2015), teaches you how start a real estate investing career with income-producing properties.  Start from scratch, build income and net worth, and retire like a king.

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