So you are running a business!

General Landlording & Rental Properties
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So you are running a business!

Ihe O.
Investor · Laurel, MD · Member since 2016 · 395 posts · 191 votes

I keep reading people here saying  "Your rental properties are a business" as a precursor to  some inflexible dogma about sticking to the letter of agreements and pursuance of remedies for breaches. 

Let me point out something about business.

Serious businesses disregard their T&C's all the time.

Banks and credit card companies waive fees every day (it's known as the proverbial gesture of goodwill). United Airlines settled with the passenger they deemed entitled to kick off the plane. I just sued a multinational corporation and even though their service agreement states their liability is limited to the amount I paid they have just settled for a 4 figure amount.

So what follows from this?

Serious businesses waive their rules for customers that they want to keep.

A word in that last sentence brings me to another point. I keep reading about training your tenant. They are not your students or your kids. Don't refer to them as if they are.

If you are running a business then your tenants are your customers. Treat them like one. 

Last but not least.

Run your business. Don't let your business run you.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
9y

You have to act like a business before you waive policies and procedures like a business.

Can you walk into a coffee shop and get a free cup of coffee? No. Their policy is that you give them money and then they give you the coffee. They may choose to deviate from that policy and give you a free cup of coffee if they make a mistake and want to retain you as a customer or if they want to reward your loyalty. They establish the rule first, then they choose when and how to deviate from it.

We typically tell someone to run their rentals like a business because they are not. They let customers walk all over them, negotiate basic terms, violate agreements, etc. That's not how you run a business.

We do have to train some tenants. Everyone that buys a car, cable TV, or a cell phone understands they have to pay their bills by the due date or there will be consequences. they don't see a private Landlord the same way and will try to manipulate your emotions in order to gain some benefit. You have the choice of establishing policies and then training them to see you as a business, or you can just wing it and see what happens.

I see this all the time as a Property Manager. Tenants see me as a business because I act like one. I don't have to train them very often. But when they meet the Landlord face-to-face, they try negotiating for concessions more often than not. My property management agreement specifically forbids a Landlord from communicating directly with the Tenant because I know the tenants will attempt to negotiate something. Our advice for private Landlords to train their tenants is valid advice. 

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  • Shaun Patterson
    Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
    9y
    Originally posted by @Ihe O.:

    @Andrew Johnson 

    Your original post talked about not paying rent for 4 months now you are talking about not paying rent on time for 4 months.  Late payments to a financial institution will go on a credit report, late payments to a landlord won't, different leverage at play. 

    If the goal is to train the tenant to pay on time and he is late 4 months in a row then clearly the training is failing.   I don't want to  followi you down these rabbit holes because  I don't think these are are good examples with which to make a counterpoint.

    They actually have a company now that post rental payment history's on your credit reports. We actually started using this our self to make sure that people pay on time and help new college kids establish credit payments. So landlords are moving on up to the big leagues as you would say. 

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  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Shaun Patterson Interesting.  Given that, I'd think the *best* service would be to institute and adhere to a late fee!  The last thing you'd want starting out building credit is a late payments.  Marks against you on a credit report can economic cost a lot more than a $50 late fee, that's for sure. 

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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    9y

    The 3rd party managers I partner with have many units under management.  Property management has a lot of variability due to the personal nature of the working relationship between them and the resident.  A person's home and its functionality and peaceful enjoyment can have a pervasive impact on their life and an owner's property can cost hundreds of thousands and in the millions (along with millions in personal liability).  Property management attempts to deal with that variability and risk by eliminating or reducing variability and risk in other areas, where it can, such as rent payment administration, inspections, noise enforcement, yard upkeep, etc.  If everything is variable, property management can be chaotic, inefficient, risky, and unprofitable, especially when you have scale.  When you have hundreds (or thousands) of units under management, its hard for the management company to follow up daily with unpaid rent and leave discretion to leasing agents (along with discrimination issues and landlord laws).

    Most BP members treat their residents professionally and with the utmost respect and words like "training" are not part of the equation (but processes, rules, and communication are a part and are clear).

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  • Ihe O.
    OP
    Investor · Laurel, MD · Member since 2016 · 395 posts · 191 votes
    9y

    @Andrew Johnson

    It does not follow that a laissez faire approach to employee lateness means that the employer is not running a serious business. Neither does it follow that it is contagious - many employees will consider it unnecessarily puts them at risk of getting fired. 

    Bank customers are well aware that other customers get privileges that may not be afforded to them. People may earn the same in very different ways - some peoples income streams are irregular, they don't need to be treated the same. 

    In my last W-2 job I was paid on the 7th and the 21st. Would kind of suck if I was my own tenant (my lease stipulates payments are late after the 5th). So if you move a tenants payment schedule how are you less of a business.

    @Mike Dymski The business credentials or policies of people running large numbers of units aren't at issue. It's the notion that  Aunt Jemima's Diner should operate the same policies as someone running 100's of McDonald's franchises otherwise they are not "running as a business" that I am debunking.

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  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Ihe O. I think you've lost complete track of your argument.  You want to use examples of a "serious business" like United, credit card companies, financial services companies, and others.  Now your contention is the Aunt Jemima's Diner is just as serious a business as McDonald's.  If you want to make your point then you can't just arbitrarily dismiss the notion that scale (when it comes to property management) matters.  You can't also dismiss the notion that the reason McDonald's is McDonald's is because they all hold their franchises to consistency and uniformity.  Not to mention your entire argument is based on property managers/owners NOT adhering to their policies.  If you want to run your own property portfolio with contracts/policies that state "no late rent fees" then you're at least being consistent.  So far you've yet to debunk anything.

    And corporate environments are contagious.  If you don't know that it might be because you've never managed a large group of people.  It can be contagious in a good way, like staying late and working hard (you know, like paying rent on time).  Or it can be contagious in a bad way, like coming in late and taking a 3 hour lunch (you know, like not paying rent on time).  It's might be hard to see that from the perspective of a line-level employee, it's incredible easy to see why when you're in management.  It's also why there's are thousands of books written on culture.  @Mike Dymski is correct in that "training" is definitely a more pejorative way of saying things like: standards, accountability, communication, etc.  Guess what happens if the CEO sees a bunch of people coming in late?  He doesn't blame the employees, he blames me for not holding them accountable.  And, by the way, in that scenario he's right to blame me.  They all don't decide to come in late one day on their own.  It starts with one and does become contagious.  If you've never been in management I can certainly understand why that's hard for you to see.   

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  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @the O.          HONESTLY,, the big difference between having a rental business, is FAIR HOUSING LAWS.. FEDERAL.. and this set the rules..  

    Coffee shops don't have Fair Housing regulations to follow, but they have health and saftey regulation, and  customer service is always important in any business, coffee shops have repeat customers and depend on them to sustain their livelihood. 

    The example,  is simply take care of your tenants and your property and stay within Fair Housing laws, your tenants will be monthly repeat customers and continue to care and pay and treat your property well.

    Leasing rules are our regulations for us an tenants to follow. So follow the rules you set and stay within Fair Housing laws and state regulations. 

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  • Christopher Bryan
    Houston, TX · Member since 2017 · 3 posts · 0 votes
    9y

    @Andrew Johnson 

     This is Goldilocks in reverse. You are stuck in the middle with uniform policies because of your size. The smaller operator  can beat you for service by personalizing  the renting experience for the tenant. A large corporate entity also has the resources to personalize  by assigning an account manager. 

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  • Christopher Bryan
    Houston, TX · Member since 2017 · 3 posts · 0 votes
    9y

    @Deanna McCormick

    So  Fair Housing laws would stop you from giving a break on a late fee to a Single mom with 3 kids.

    That doesn't make sense - so I looked it up and you're wrong. 

    "So long as late fees are not granted or denied based on a resident’s protected class, waiving a late fee to help out a long-term resident, as part of a marketing campaign, or as a reasonable accommodation, does not violate the fair housing laws."

    The guidance is from  http://bit.ly/2qMmV7X and  strangely features many of Ihe O's examples.

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  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Christopher Bryan Nice of you to create an account to take up Ihe's torch 😂  Sure anyone "can" void a late fee, it's the contention that they *should* do it.  And that not waiving a late fee means you're not running a "serious business".  However, if you do waive a late for me (a white guy) because you think I will pay but choose not to for your single mother with 3 kids, where do you think you'll end up?  You'll likely end up having to forgive all late fees or end up trying to rationalize how giving a break to a white guy was part of a marketing campaign that, what, the single mom wasn't eligible for?  Granted, it's a narrow edge cases but policies/contracts often exist to steer you around those edge cases.

    And, not for nothing, but most BP members aren't running a non-profit 😬

    1Reply
  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @Christopher BryanMy point about running a rental business is that we are aware of Fair Housing Laws, were not a coffee shop.Also your personal profile lists nothing about you so are you a rental owner or just someone that runs a charity. What you chose to do is up to you. But for the majority their is a reason for a written lease. 

    Your example of giving the "single mom with 3 kids" a  break for not paying a late fee, is why there is fair housing, 

    Better example would be to give anyone a 1st time late fee adjustment, or do a late fee adjustment if the next 3 months were on time and paid in full. This still would be a customer service accommodation, yet be a set policy and be within a reasonable accommodation.

    Rental is a business and if your managing 320 units a month, you set policies, so your consistent. Smaller owners may have more flexibility but tenants should be expected to  follow the terms of the rental agreement and so should managers, agents, and owners.  

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  • Ihe O.
    OP
    Investor · Laurel, MD · Member since 2016 · 395 posts · 191 votes
    9y

    @Deanna McCormick  A single mom with three young kids are a protected class under Fair Housing legislation. Fair Housing does not say you have to treat every body the same - it says you cannot discriminate against a protected class. 

    You do realise that despite following the terms of a rental agreement/written lease strictly and uniformly you could still be in violation of  Fair Housing laws. 

    I have tenants that live across the road from each other. Their rental agreements both stipulate that rent is late after the 5th. One gets paid before the 5th - the other doesn't gets paid till  the 8th. I manage that aspect of their tenancies differently and will continue to do so.

    I am not a template for how a person with 320 units should run their business. Equally a person with 320 units is not a template for how I should run mine.

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  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @Ihe O.

    Your template for running your business is yours. I don't care what you do or how you do it.

    I'd recommend you take a refresher Fair Housing Class.

    Landlords make agreements with tenants that are on SS or SSD or other type of government assistance for rent due dates all the time because their monthly checks come in around the 3rd.or shortly thereafter.  This up to the landlord and when the tenant discloses this at lease signing, the accommodation is noted. 

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