Operating rental properties and dealing with your tenants are not separate jobs. They are inseparable parts of landlording. I owe a great deal of my real estate success to my landlording abilities. Some folks 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.
The Good News
Landlording is a professional that can help you 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 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 a 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 big money working for themselves.
Learn Your Business!
Owners of small income properties who don’t bother learning the landlording part often throw away a fortune because they allow the tenants to run their business and control their buildings. I consider landlording and people management the $10 job that earns me $90. I charge 10 percent for managing properties. When you manage your own properties you can pay yourself, but saving 10 percent is the same as earning it.
You don’t become a skilled landlord because you acquire houses. You only become the owners. Skilled landlording will require both education and practice. There’s only two ways to learn from landlording. You can learn from people who have years of experience or you can learn from your tenants. [Attend one of the many FREE landlording seminars offered by AOA!] Even if your basic investment strategy is to buy and sell, tenants will generally be involved. Tenants can make or break a property. Owners who pay little attention to landlording skills are allowing property managers or their tenants to have control over their investment dollars.
Tenants are Your Lifeblood
Never lose sight of the economic fact that tenants are the life blood for landlords. Tenants are the owner’s customers and are the most important part of owning and operating rental properties because they supply the money.
A major advantage 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 they need to. It’s strictly a single party control. Complete control or as complete as possible is a most important part of making big money in real estate.
Being a good landlord is 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.
ACT – Don’t Re-Act
Landlords who learn to act before small problems become big ones will control most tenants. This strategy works well collecting rents and enforcing your tenant rules. Remember to keep your list of rules short and enforceable rather than long and without any teeth.
Good landlords always act first rather than re-acting later. Don’t fight and argue with your tenants any more 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 bosses 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. 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 greatly reduced price of course!
Save Your Sanity
Landlords often find themselves in hot water with tenants because they try to force too much logic and common sense into managing their tenants. Logic and common sense have their place, 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 on your tenants; a very common mistake for new landlords. What earthly good would it do you to make a million dollars from your rental properties if your tenants drive you insane? My advice – stay away from them as much as possible. Save your sanity – you’ll need it for collecting rents.
Jay P. DeCima, “Fixer Jay” of Redding, California has specialized in fixing up ugly houses and small apartment buildings since 1977 and currently manages and oversees over two hundred investment houses he owns. Jay’s latest book, Investing in Fixer Uppers, was voted number one on Chicago Tribune’s Top 20 Real Estate books list.