Today I want to stir up come controversy – and get your opinion on this matter.
You see, I’ve stated numerous times on both the BiggerPockets Blog and in the Forums that my favorite tip for being a good landlord is not admitting I’m the owner, but instead just being “the property manager.” In fact, on my list of the best advice for easy landlording, (see How to Be A Landlord: Top Ten Tips for Success) that was my number one piece of advice. I’ve even mentioned it in the Podcasts a few times.
I didn’t invent this idea. I believe I first heard about it from Mike Butler in his awesome landlording book, “Landlording on AutoPilot” (which if you are a landlord and have not yet read – go to Amazon right now and get a copy. You’ll thank me, and Mike, later.)
Ever since talking about this on the site, I’ve had several people ask me if this wasn’t a little too deceptive, especially since anyone can look up the owner in the county records and find out who owns a property. What if I got caught? Isn’t it morally wrong to do this?
So today I wanted to look a little deeper at the issue and get your opinion. I invite you to read through my reasoning below – and then leave me a comment and let me know if you agree or disagree by commenting below.
Also be sure to check out the other side of the debate, by reading Kevin Perk’s great counterpoint article Do You Own the Place? Why You SHOULD Tell Your Tenants About Your Ownership.
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“I’m Not the Owner…”
For those not familiar with this way of operating, I’ve stated previously,
“Finally, my number one tip for being a successful landlord: don’t be the owner. This is especially true for those of you who, like me, are peacemakers and non-confrontational. As a landlord – you are going to face a lot of tough decisions and awkward conversations. When you are the owner – the blame is on you and as a result you will often make decisions based on convenience rather than common sense. (After all – you better not be the owner. The owner should be a business entity that you set up with your attorney.)
Instead, from this moment on, you are no longer the owner. You are simply the property manager. ”I can’t move my 200lb dog into this studio apartment!?” ”no, I’m sorry – the owner doesn’t allow dogs here.” Additionally, you can tell the tenant “I need to talk to the owner about this” to buy yourself time to think about odd requests. Instead of the tenant being upset with you – they are now upset with the mysterious “owner.” Feel free to play this up all you want:
Me: “Sorry, I tried talking the owner into it but he is a stickler for the rules.”
Tenant: “Ugh, I hate that guy”
Me: “Yeah, me too…”
It’s much easier to make decisions when I am just a third party in the relationship, rather than the “big bad owner.” I’ve found this works really well with my personality, and helped me to avoid a lot of nasty conversations that I’d rather not engage in.
Is This Lying?
As a deeply moral guy, I don’t believe lying is ever okay. Not in business, not in life, not ever. So before I decided to switch to this strategy, I really had to ask myself “is this lying?”
In the end, I’ve decided it wasn’t – and here is why.
I hold my real estate properties with LLCs, not personally. In other words – I don’t own the properties. I have a management role in an LLC, that owns the property.
Yes, the distinction is subtle – but in my opinion, it’s separate enough to not bother my conscience.
Not stating the whole truth? Yes. Lying? I don’t believe so.
Some people might believe I’m being too deceptive here, and I understand the concern. I mean, I very clearly am making a point to not let the tenant know I own the property. However, in my opinion – I don’t believe it’s any of my tenants business to know what business I own. I don’t let them know about the companies I have stock in, the political party I donate to, or the church I tithe to. Why should I tell them I own a company that has real estate holdings?
If a tenant directly asked me “Do you have any ownership interest in this property” or “are you involved with the LLC that owns the company” I would not lie – I’d tell them yes. However, I’m not asked this, ever, and don’t believe I ever will be.
Furthermore – I feel even more justified in my decision because I know that in every sense, I am separate from my business. I know if I wanted to go pick up the rent from one of those LLCs, and just stick the money in my pocket and buy a new TV, I would be breaking the law (or at least the tax code.) That money does not directly belong to me – it belongs to the company, which then pays me. If someone were to sue my company for wrong doing, they aren’t going to sue me personally (hopefully) because the company is a separate entity that I paid good money to a lawyer to create.
So I want to know your opinion.
Is it wrong? Is it lying? I’m totally opening up this conversation for debate, because I want to know what others think. In the end, I think a lot of it comes down to my personal conscience – and as of this point, I don’t feel wrong doing it.
Please leave your feedback in the conversation below, then check out the following article:
Should You Tell the Tenants that You Are the Owner? [Counterpoint]
Photo: Elisa Dudnikova