Simon Lagree Had it All Wrong

Without doubt, being a landlord requires a certain mindset. Before actually owning rent houses, I was certain I didn’t want to participate based on our first experience as tenants. Right after the wedding, the mister and I moved into a lovely little duplex on the edge of town. We stayed 2 ½ years, paid on time each month, never caused damage or broke a single rule. And yet there was no doubt that our landlord was the adversary-he made sure we knew from day one.

When sewage from the entire complex started backing up into our bathroom, his reply was typical of what we’d come to expect. He told us it was a ‘city problem’ over which he had no control. When the excrement seeped through the wall, soaking the living room carpet on a regular basis, he said we’d best get the rent in on time regardless. After 3 months of dookie, we finally left in the middle of a one-year lease. Our loving landlord threatened to sue for the six months remaining and refused to return our deposit.

The Landlord Stinx!

Of course not all landlords are rotten, but enough are that certain stereotypes have grown up around the profession. Just as the words ‘Used Car Salesman’ and ‘IRS Agent’ bring vivid images to mind, landlords suffer from the reputation of being heavy handed, greedy, and suspicious. There’s a certain everyone’s-out-to-get-me mentality that smells up the name.

Unfortunately, sometimes everyone *is* out the get them. Tenants with no respect for private property, governments that assume landlords are milking the poor, state legislatures that want to ensure deadbeat tenants have a place to stay (whether they actually pay rent or not)… no wonder some landlords wind up jaded.

If this were the only way to do business, I’d go back to running likker. But over the years, we’ve found another way… a balancing act of authority and business-like professionalism backed by a well-written lease.

Don’t Smile Until Thanksgiving

I’d like to propose another model based on my first grade teacher back at good ol’ Freeman Elementary, Mrs. Locke. She was ancient–probably all of 30. Her flaming red hair and Yard Stick of Doom had a class of 28 little wildcats quaking in their loafers. She stood over the class, hands on hips and proclaimed her authority with The Look.

She repeated the rules… and repeated the rules… and repeated the rules. And we followed the rules because we respected her. She was not our friend. She was not our pal. She was The Teacher. She could do awful things like send us to the Principal. She could put our desk in the hall where everyone that walked by bore witness to our shame. And if all else failed, the worst punishment of all–The Paddle (which, come to think of, she never actually used.)

Back in the days before smiley-stickers, good teachers knew how to control the classroom without drama. To establish respect, the teacher needed to be seen as an authority figure with actual power. Rules were made, rules were written on the blackboard, rules were obeyed.

Or Else.

So in the same spirit, I present:

A First Grade Teacher’s Rules of Landlording:

• Remember who you are. You own the house. You make the rules. You are The Landlord.
• You are not your tenant’s friend. Don’t pal around with someone you might have to evict.
• Maintain a presence without being oppressive. You either have authority or you don’t. Bluster, swagger and heavy-handed bluff will cause tenants to lose respect (and makes you look silly.)
• The rules are the rules. Repeat the rules, follow the rules, don’t bend the rules-ever. You’ll be sorry.
• Everything needs to be in writing. You can’t send someone to the office without a note and you can’t evict someone without documentation.
• This is a business-act professionally at all times including the way you dress. (Mrs. Locke had the best bouffant hairdo in the whole school…we were very proud.)
• Reward good tenants. You want them to stay, right? Let them know you appreciate the care they give your house.
• Refine your lease as you go. If you find your kiddies are bringing Hot Wheels to class, institute a no-Hot Wheels rule. If you find your tenants park Hot Wheelz on your grass, put a No Hot Wheelz on the Grass clause in future leases.
• Adapt and overcome. Learn from your mistakes. Cut your losses and move on–just don’t make them again.
• Don’t be defined by what you do day-to-day. I ran into Mrs. Locke when I was in nursing school-no missing that red hair. Turns out she had a life outside of first grade. Who knew?
• Remember: People are just people–if they’re honest and trustworthy, they will remain that way once they’re tenants. If they’re liars and cheats they will lie and try to cheat you too-it’s nothing personal.

Which leads to: Nothing is personal. It’s just business.

Random picture of JoJo on the couch that has absolutely nothing to do with landlording.

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Tags: landlord, Landlord Tenant, lease, rent houses, renter, tenants

The mister and I waited years before buying our first rent house. Of all the various and sundry reasons for staying out of the game, our biggest obstacle was a severe case of Tenant-phobia– the crippling fear of Landlording. To make matters worse, anytime the subject came up, helpful friends and relatives regurgitated the same horror stories over and over… tenants trashing houses, refusing to move out, paying late, cooking up drugs in the garage, selling off the fixtures for booze and worse.

One day it occurred to us that once upon a time, we were tenants-and we never paid late, or trashed anything, or refused to move anywhere or cooked up anything in the garage. Come to think of it, none of our friends had that much fun either. As the dawning light of reason broke forth, the answer to our dilemma became immediately clear-we needed to target ourselves.

The Part Where We Clone Us

For the sake of simplicity, let’s call our target Cab (for Connie Always Broke). How do we lure Cab over to our lovely rentals so she can pay off the mortgage for us?

• For starters, Cab doesn’t do drugs, so she doesn’t want to live in a drug-infested neighborhood.

• Also, she’s not so tough… in fact, she’s a big weenie, chicken-baby so high crime areas are out too.

• Cab’s trying to save enough to buy her own house. She’ll pass on a larger brick home with central air and heat to live in a smaller frame home with window units to save $100 per month.

• Without exception, Cab will pick the cleanest house or apartment in the best condition in her price range. She’ll head right out the door at the first sign of filthy carpet, dingy paint, roach droppings, broken drawers and/or other signs of delayed maintenance.

• Cab follows the rules. She wants to know what’s expected from the beginning. A clear, logical, understandable lease makes her feel secure.

• Cab wants to be treated with respect. If her landlord is jaded, angry, bitter, money-grubbing, and/or heavy-handed, she’ll find another place when the lease is up.

• Not surprisingly, Cab and her friends are very much alike. She always asks the people who share her values for referrals because they understand what she’s looking for.

• Cab likes puppies. And gardening. And painting every room a different color. And because those things aren’t landlord favorites, she’ll eventually figure out a way to buy her own place. But if the landlord realizes what a great tenant she is and eases up on some of those restrictions, she just might stay a few years longer. Maybe.

Some folks can handle problem tenants. Some people *are* problem tenants. And some of us just like a little peace and quiet.

The Part Where We Ponder and Stuff

In general, I look for single family homes or duplexes in quiet, stable neighborhoods where the yards are well maintained. We check backyards for the presence of fighting dogs and the absence of swing-sets. Lawn chairs and rockers on the porch are good. Large groups of able-bodied men hanging out during working hours is not-so-good. And with every house and every neighborhood, we ask-

What type of tenant will this place attract?

Finding great tenants begins before you buy your investment property. Learn your local market, target neighborhoods that will attract the type of tenant you want to deal with and solve the majority of tenant/landlord issues before you start.

It’s funny– we’re landlords now and still hear the same horror stories…and it’s only recently that I noticed that all those stories are told by people who aren’t landlords.

Interesting, huh?

Before: When good little houses go bad, they attract all sorts of bad things.

After: Much better. Now it’s ready for Cab and company.

Tags: cash-flow, investment property, landlord, Landlord Tenant, screening, tenant, tenants

If you can’t get rid of them, raise their rent . . .

Sometimes we end up in a situation where tenants aren’t the wonderful people we hope that they are. They throw out of control parties, damage the property, litter the property, have 10 people stay in the 2 br apartment, pay rent late, and so on. You get the point - undesirable.

Many landlords don’t want to have to go through the eviction process. Often times, evictions can be costly and time consuming.

If you’re close to the end of a lease (and you’re not in a rent controled area), why not just raise the rent? I’m not talking about raising rent 2 or 3 percent, but 10% - 15%. There aren’t many tenants who will put up with that kind of increase, and if they do, then it might be worth reconsidering keeping them around. Remember, the odds are they would be paying much more then typical market rents at that point.

Set the Ground Rules Up Front

To avoid all of this in the first place, you need to establish your guidelines up front. You cannot put up with bad behavior, or your tenants will walk all over you. Write a set of guidelines that they must follow with a schedule of fines and have them sign it with the lease. If they pay late, fine them and send out your written warnings preceding eviction process. If they damage the property, fine them. The key is to let them know you are in charge.

I can’t tell you all of the headaches I put up with at first because I was too nice. When I started to lay down the law, and got rid of the undesirables, landlording started to become a much easier process.

Tags: evict, eviction, landlord, rent, rent-control, rental-property, tenants

An article in the Sunday issue of the New York Times (“A House Divided:  Uncivil War on E. 73^rd Street,” December 10, 2006) describes a dispute between a landlord and an unhappy tenant in a tony Upper East Side brownstone of New York City.  A battle like that is always a case of someone’s word against the other, but if you read through the article, it becomes easier to decipher who is in the wrong, so to speak. 

Mr. Pavia, the landlord, rented out some floors of his luxurious brownstone to several tenants.  Along came Mr. Couri the tenant.  Mr. Couri started to have problems with a longtime tenant, a gay designer, who lived above him, complaining of noises, music, and partying.  He sent the designer letters citing “lies… late p.m. homosexual escapades,” and threatened to disgrace him by writing to interior design agencies and magazines.

The designer, who never had problems with other tenants or Mr. Pavia before, moves out.  Mr. Pavia eventually sued Mr. Couri for obnoxious and harassing behavior, and Mr. Couri countersued by saying that his landlord refused to disclose the rent-stabilized status of the building.

The article, however, mentions that Mr. Couri, who dresses impeccably in a 3-piece suit, has a history of suing people (nearly 150 times since 1972).  He also has pleaded guilty in the past of defrauding a bank.  If Mr. Pavia had done a background check on him, the problems might have been prevented.

We’ve also had some issues with tenants.  Years ago, when my husband was looking to rent out his apartment, a friend of his who worked in theater introduced to him a young man who was an actor.  I even met the guy; he was good-looking, personable, a little jittery maybe, but seemed like a nice guy.  But jittery was the part we should have focused on.  He turned out to be a crack addict.  Luckily, his family stepped in and moved him out so we didn’t have to begin eviction proceedings.

Unless you personally know the potential tenant well, a background check on a potential tenant should be performed.  A check on credit history and from a tenant-screening agency can be done easily and should be done even when a tenant comes with a referral, as ours did.  For more information, check out on what landlords should know from the FTC.

Tags: biggerpockets, city, dispute, East, landlords, New, renter, Side, tenants, Upper, York

After a long day of rest, I’ve emerged from my sports cocoon to bring you my Sunday wrap up. I’d like to first congratulate Tiger Woods for his 4th straight tournament win, and I want to wish Andre Agassi good luck in the final tournament of his career. Ok . . . back to real estate.

- Here is a sad case of irony:
The Boston Globe covered the story of Jose Felipe, whose credit was destroyed by a mortgage consultant who used his name and social security number.

“Some brokerage firms, which promise borrowers “100 percent financing” and “guaranteed home ownership,” operate without required state licenses. And because the state licenses mortgage companies and their owners, and not the loan officers who work for them, it is difficult for consumers to check the record of an individual officer. In contrast, the state has a website where consumers can easily review the licenses and disciplinary records of dozens of other professionals, including accountants, veterinarians, and manicurists.”

So the state of Masachusetts lets you check up on the lady who does your nails, but not on the guy who has complete access to all of your personal financial records. SAD!

- In Arkansas, Senator Kim Hendren said “he will try again in the 2007 state legislative session to reform the state’s statutory foreclosure procedures. Reform is needed since foreclosure situations are apparently becoming more common, he said.” Isn’t it great how proactive our leaders are? Now that the market is topping over again, the lawmakers start to notice. Where was Senator Hendren when the local sheriff was buying his $1 million mansion for no money down? Who was protecting the homeowner back then?

After a year of passing blame, confusion, elections, and general chaos, the city of New Orleans is setting a deadline for gutting and cleaning up homes damaged from Hurricane Katrina.

“City officials have set Tuesday the storm’s first anniversary as the deadline for homeowners to gut or otherwise clean up their properties. Landry is among those hoping the deadline will spur a cleanup that will lead to more redevelopment and repopulation after the exodus that followed Katrina. “The city needs to do what it needs to do,” councilman Arnie Fielkow, who helped push the ordinance setting the deadline, said at a meeting Friday. People who don’t comply with the deadline after being put on notice face a range of possible penalties, from liens being placed on their property to the seizure or destruction of homes.”

Exceptions to the deadline include residents of the Lower Ninth Ward, and those with an “acceptable” excuse. The city needs to set a deadline, or things will go on forever, but the government needs to step in and help all the people who are left to fend for themselves against the insurance companies who find any reason not to pay a claim.

- I just read a staggering piece of information from Black Enterprise: “Membership in the National Association of Realtors has increased by 75 percent in the last 10 years. The number of real-estate agents in the United States increased by 26 percent between 2003 and 2005 and 40 percent over the last five years to about 2.5 million.” I wonder what that number will look like as things settle down. Anyone?

- I’ll close with a peek at a nice little piece from REIBlog.com, listing Best Rules for Your Success in Income Real Estate. The list includes advice like “Have strict rules for your tenants” and “Keep accurate records.” While most of the points are fairly obvious to the seasoned investor, it is a good start for newbies.

Until next time . . .

Tags: foreclosure, fraud, gut, gutting, katrina, lower-ninth-ward, mortgagefraud, neworleans, Realtors, reform, tenants