Tenants: Customers or Scum?

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A couple of weeks ago there was a posting on the Bigger Pockets forum where the poster described their tenants as SCUM… (don’t go looking for that discussion, it has already been removed from the system). 

While the poster did get enough thoughtful responses to address their question, the dialog quickly deteriorated into insults regarding the posters use of the word scum to describe their tenants.  I should add that the particular tenants being discussed were Section 8 Government assisted tenants.

As I watched this discussion develop and in further discussing it with my wife I got to thinking about how landlords view their tenants and thought this might be a great topic for discussion… and hence this article.

For those landlords out there who have been in this business for a while you know where I am coming from when I say that there are good tenants and there are bad tenants.  And that some tenants may indeed be considered less then desirable…

I can honestly say that I have only had one tenant who might come close to being defined as SCUM and this tenant wasn’t a Section 8 tenant.  (I will save that story for another article focusing on how to deal with personality disorders and hoarder tendencies).

Now, I know that some tenants can be very challenging.  In fact in my experience I believe that the numbers regarding good and bad tenants break down something like this…

10% of our tenants are perfect.  Rent is paid on time.  The property is in pristine shape and you almost never hear from them

80% of our tenants hit our radar screen from time-to-time but are otherwise good tenants.  They make an occasional late payment and have maybe a maintenance issue or two… but otherwise they take very little of your time. 

10% of our tenants are real pains in the BUTT.  You know who these tenants are.  Their rent is always late, and you are always in some stage of evicting them.   They constantly complain and the wear and tear on the property is demonstrative.  And,

Based on my experiences, every-time you get rid of bad tenant… it seems one of the 80%s steps up to take their place — and that is the life of a landlord.  But I digress…

Given the importance of tenants to your business, I am perplexed that any landlord could have an opinion that their tenants are scum!  In many regards, I believe our tenants are very much like customers, or perhaps as one guru describes them… employees. 

Think about it.  Our tenants go to work (hopefully) everyday.  They work hard.  They get paid.  They spend a portion of their earnings on shelter, a shelter you own and they are paying for.  And, if you purchased correctly your customers are not only paying your mortgage and other expenses, but they are providing you with positive passive income as well.

How could you as a landlord consider someone who is paying your mortgage (even if the Government is providing most of the rent) SCUM?

It defies logic… wouldn’t you agree?

To be sure, it is the rare tenant who arrives at your doorstep who automatically makes it into the top 10% of those near perfect tenants described above.  But what can you do as the landlord to help every tenant at least fall into the 90% who can be classified as good tenants?

It’s not what can you be doing, but what you MUST do to ensure that your tenants know they will be treated fairly and consistently as long as they follow the RULES.

And what are some of these rules?

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Rules for Managing Your Tenants

  1. First is a rule for you the landlord; tenants pay your mortgage.  Screen them thoroughly, select only the best, treat them with respect and never, ever deviate from your policies.
  2. Once selected (and selecting tenants is the most critical job you will perform) your entire relationship with your tenants is defined by your lease or rental agreement.  Make sure this document contains everything you need to effectively manage your tenants.
  3. Train your tenants constantly.  If in doubt just follow items one and two above, never deviating from your policies and follow your lease.  When tenants want to push the envelope, don’t hesitate within the constraints of your lease, to push back… hard!
  4. When dealing with tenants, don’t let their emotional outbursts drive your responses.  This is advise I have trouble following, but my wife on the other hand was a master at defusing outbursts by removing herself from the situation — usually by calmly stating in phone conversation that she couldn’t assist the tenant if they insisted on yelling and screaming and then should say good-bye and hang-up.  I can’t tell you how effective this was as a way of gaining control of the situation and TRAINING every tenant to understand that if they wanted things done, they needed to be respectful. 
  5. Never pass up an opportunity to train, train and train some more, every tenant you have.  In case you haven’t noticed I am a huge proponent that when you spend time to train your tenants regarding how your business is run and how you want them to live in your properties, the number and severity of the issues you experience with your tenants will diminish fast!

The bottom line is this: your tenants are NOT SCUM and are actually a very critical part to your business.  And, just like you wouldn’t expect a new employee to understand the ins and outs of their job without training, neither can you expect the same from your tenants without you spending time training them.

In closing I will leave with this…

On sure measure of the success of the principles I outlined above were the numerous phone calls from our previous tenants (tenants who were renting from us when we sold our portfolio in 2006) who sought out our advise on how to deal with their new landlords who had no standards and who had no idea how to manage their rental properties.  While it was gratifying to be approached by these tenants, it was a shock to realize how many landlords were clueless… 

Sadly, I still see that trend today!

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.

21 Comments

  1. Peter – Fantastic post! The thread that you refer to definitely made me pretty uncomfortable as well. I think your ratios are probably pretty accurate, though these numbers will likely shift somewhat depending on the neighborhood. Customer is probably a pretty good description of your tenants; treat them respectfully, “train” them like you mentioned, and you should have a pretty good experience. On the other hand, despite best efforts, there are always those 10% who really can jade you as a landlord. I’ve probably had 30% of my tenants fall under this category, but it was because I made some poor decisions in selecting rental properties to own. The price was always right, but the location was definitely not. Beware.

    • I learnt very early on in the game the importance of training your tenants lest they train you! Another pitfall inexperienced landlords fall for is accepting a less than desirable tenant just to end the vacancy – but doing this will cost you more in the long run.

      Currently more than half my tenants are in the “top 10%” bracket you mentioned. I attribute this not only to my policies and screening but also to the fact that higher end rental properties tend to attract better quality tenants. i.e. when they hit a bump in the road they have the financial means to still pay the rent unlike low end property tenants where a single car repair can derail them. Contrast this to a landlord friend of mine who has exclusively lower end rentals – he follows the same policies and screening that I do more or less but seems to be either chasing someone for rent or eviciting at least once a month.

  2. Peter,

    This was an incredible post. Very informative to landlords who are. having a tough time managing their tenants. As you mentioned in your post, you need to set clear standards, enforce those standards, and train often. Peter, what you have identified are principles of a leader and leadership skills are essentially what landlords need in order to be effective.

  3. Pete,
    Great post. We have all had bad tenants, the key is take responsibility for the fact that we are the ones that accepted their application. I think its very important to treat tenants with the same level of respect you expect from them. Its amazing how much can be accomplished with level headed respectful conversations. I know you have a ton more information on this subject, can’t wait to hear it.

    Jason

  4. I have come to learn that good tenant screening is the most important component of landlording, and yet exelllence remains elusive. I also know who puts food
    on our dinner table and pays our mortgage. Our esteemed customers. Who are human and must be managed, and yes, trained. Now how to avoid that bottom 10% and indentify and attract that top 10%. Will you tell us that in your next post, Peter?

  5. Thank you for sharing all these facts, great post! When you are a landlord, not only do you have one of the hardest jobs in the world. Not only do you have to find the right tenant, but you have to make sure that, that tenant is actually compatible with you.

  6. Richard Warren on

    Outstanding post Peter. I agree with your ratios, I’ve had the occasional tenant in the bad 10%. However I’ve had more than my share of excellent tenants and a lot of that is because I treat them fairly and with respect. I believe that a landlord with a bad attitude will get a higher percentage of bad tenants.

  7. Wow, I did not read the original post that prompted you to blog this, but I know you thoroughly addressed the issue. Almost all of what goes wrong with tenants is the result of something the landlord did not properly manage. Customer service skills, business acumen, some basic legal knowledge, sensibility, and organization/management skills are required for someone being a landlord.

  8. Great post. I think screening section 8 tenants is more challenging than in a class A retail or office space. There is a probability they didn’t end up on section 8 by being the most reliable people going through life. Having said that, respect goes a long way in working with any tenant in any class of property. To call anyone scum suggests an unhealthy dose of both disrespect that most likely has hubris as its root cause. Especially as section 8 is highly profitable, I find his comment particularly egregious and simply wrong. I’m glad you removed the post. Its uncalled for!

  9. Excellent article! I absolutely look at my tenants as custmers. And, yes, I have Section 8 tenants and properties in less than desireable areas. I look at the tenant screening process as a chance for me to decide, “is this a person with whom I want to do business?” “Do I trust that they will pay me” and “how will they treat my property” are the 2 questions I am trying to answer when I screen. I choose to do business with those people that prove to me that they will pay me and keep my property in excellent condition.

  10. This is a great article! I agree most of the problems are caused by 10% of the tenants, but a good Landlord or PM can reduce their problems by screening thoroughly, documenting everything, and enforcing policies fairly and honestly. Any Landlord/PM that refers to tenants as “scum” is probably a poor manager, resulting in an increased number of problems.

    I bet I can find plenty of articles or discussions on “scum” Landlords/PMs and I would tend to side with the tenant in good percentage of the cases, if not a majority. We have to know how to run our business like a business while still treating people like people and not cash cows or pains in our back sides.

  11. Still amazes me how many landlords DON’T know what they are doing…and not so much the first-timers either!

    Many of the foreclosures I’m looking at now (and being dumped on for average 50-70 cents on the dollar, if not less) were SCUM landlords! How do I know? Property is in bad shape, they grossly overpaid for the home, they got a junk loan on it, and then they were foreclosed on within 5 years max.

    But to say tenants are always SCUM? No way…either that or you don’t know how to deal with people, period.

  12. WOW… I am amazed at the responses to this article. Little did I know how important this topic would be…

    It is obvious to me, as it should be to everyone who reads the article and the comments, that there are many successful landlords who understand that proper screening, showing respect towards tenants, and executing sound business management principles will result consistent positive cash-flow from our tenants.

    Pete

  13. I like the teaching about training tenants to be aware of and abide by the lease, but you can’t teach an old dog new tricks, as the saying goes, so you want to screen tenants And find ones with decent habits to start.
    I have also had better results with tenants who really like my rentals, as opposed to tenants who just need a place to live and my property may be their fourth choice.
    Finally, it’s important to maintain a business/friendly balance. I’ve erred in the past by trying to be too friendly or wanting tenants to approve of me as a LL. This is why having a good rule book or lease to solve disputes and give guidance is essential. Great Post.

  14. Sometimes tenants try to “take advantage” because their prior landlord “taught” them that it’s okay to be late on rent or break things, etc. I have heard of landlords just accepting late rent, partial rent, or no rent, because they were afraid their tenants were going to ask them to fix things. And the tenants didn’t want to ask the landlord to fix things because then they were going to demand the rent, or raise the rent, etc

  15. You must be managing properties located in nicer areas. When I was young and stable but not yet “doing well,” I bought a house in a low-income area of town, which coincidentally was also predominantly black. When my financial situation improved enough for me to move on to more luxury living, the housing crash had struck and my property was upside down. Unable to sell it, I kept it empty for a year. Despite frequent visits to clean, spray pesticide, and maintain the lawn, and despite surveillance cameras and alarms and motion lights, it got vandalized over and over, so then I decided to rent it out. Here’s what I learned after 14 years of renting it out, both through property management companies and on my own.

    I have yet to come across a single applicant with good credit and no criminal history who wasn’t also 1) white and 2) averse to being in a “black neighborhood.” I never considered that this would be such a huge factor when I bought the house. I certainly never cared what race my neighbors were. That’s not to say that there are no blacks with good credit, but if there were any, they weren’t looking in my area either. All I got were applicants with multiple collections, judgments, lates, criminal records, evictions, and unwillingness to take drug screens. Because of this, I was forced to either keep the house vacant and pay for costly vandalism repairs every few weeks, which never happened when it was occupied, or lower my tenant standards. I tried 14 years of lowering standards, both renting out the whole house as well as on a per-room basis like a student suite. The conclusion?

    Tenants in low-income areas ARE scum. I’m not what I’d call an invasive landlord. I’ve never once approached a tenant about being late on a rent, I’ve never evicted a tenant, I’ve never sued a tenant, I’ve never exhibited unprofessional behavior, and I’ve always responded to maintenance requests immediately. And how do tenants repay me for providing them a place to live? They don’t keep up with rent. They don’t obey smoking rules. They bring illegal substances onto the property. They steal appliances. They hammer holes in the walls. They flood the bathrooms and kitchens. They have fights with neighbors. Their girlfriends burn my furniture (I always provided furnished rentals) on the front lawn. They leave trash everywhere. And then they move on to begging and pleading with the next private landlord or family member they’re going to screw over. In 12 years of trying different approaches, different management services, and different standards, it has never once been worth having a tenant. They always ended up costing more money than I made in rental income. If you want to make rental income, you better be using property in a high-income area of town. If not, you’re better off keeping it empty if you can afford it, selling it if you can’t and it’s not upside down, or canceling it out with a shortsale or deed-in-lieu. Rental property in low-income areas will only draw the worst scumbags for tenants.

  16. Wow. TRAIN TRAIN TRAIN. I’m a renter who can’t afford a mortgage. I wish I could, as I HATE landlords. This article makes me hate you guys even more. Train?!! Okay, now I KNOW you guys view us like dogs.

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