Should You Tell the Tenants that You Are the Owner? [Counterpoint]

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This question seems to continually pop up on my radar, and I don’t know why – this seems pretty simple to me.  What am I missing guys? (See Brandon’s article last week “Is it a Lie to Tell the Tenant I’m Not The Owner?“)

When I first started in the game of landlording, I remember reading a lot of opinions on the subject, and there is certainly a lot of advice out there which would suggest that hiding your identity as the owner of the building from your tenants is beneficial.  Eight years into this life as a landlord I have developed a strong perspective on the issue, and it runs contrary to this advice.

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I Always Tell Everyone Involved That I am the Owner!

This gives me the opportunity to say to my tenants – if you have a problem, come to me; but know that if I have a problem, I am coming to you…nice, neat, and everything out in the open.

Realizing that this is somewhat of a bold statement in the face of an age-old argument, and respecting opinions on the other side of this argument, I feel that I owe an explanation.  I will approach this discussion from two focal points – moral, and practical.  Don’t worry – this won’t take long…

Let’s Get the Morality out of the Way – It’s Easy 🙂

On the “morality” level this conversation is a non-starter in my view.  Follow my logic guys – this isn’t rocket science:

If you own the building, but tell tenants that you are just the manager, then regardless of what your reasons are – you are lying!  I am not necessarily passing judgment here; well, may be I am…But more than that, this is simply statement of fact, isn’t it?  You are not being truthful, which is how we define lying.

Are you the kind of person who is comfortable with lying?  Does your wife know this?

Now the Practical Piece

First a general thought – I believe that energy breeds energy.  As I stated in Podcast 14 here on BP, you can certainly be a schmuck and still make money.  But, you will find it difficult to hang on to your success.  Why?  Because honest people will eventually figure out that you are not one of them and will quit doing business with you, while at the same time your “ways” will attract business partners, customers, and clients who will eventually swindle you!  You are not the best at your game, and eventually somebody will come along who will burn you.  This is a fact – happens all the time…take it or leave it.

Now, according to some people the main “advantage” of telling tenants that you are a manager and not the owner is that it creates a buffer.  The thinking goes something like this:

Tenant’s question:       Hey, can I get this or that repaired?

Your answer:              I don’t know.  I will need to ask the owner…

And this, apparently, is beneficial because it buys you time to make up your mind and creates a bogeyman should you decide to decline – you can blame “the owner”.

May I suggest that if you need time to think things over, there is nothing wrong with simply saying to the tenant – let me think about it.  Furthermore, if your answer is no, why not just say – my answer is no and here is why; I hope that you understand and can except my answer, but if not please feel free to move out and it’ll be my pleasure to find someone who’ll be too happy to live in this wonderful apartment.

OK – this only works if you are respectful of your tenants needs, stay on top of the repairs, and are the kind of a landlord who goes above and beyond WITHIN REASON.  This would not work if your goal in life is to get out of your responsibilities…but, be aware of the following:

Question:      If you lie to your tenants, why should you expect your tenants not to lie to you?  And if your tenants think that it’s OK to lie to you, how long do you think you will last as a landlord?

The answers to the above describe precisely the reason why most landlords burn out and get out of the business before being able to realize the benefits of it.  Landlord/Tenant is a business relationship, and it must be built on a foundation of honesty and respect.  Besides, we can rationalize this all day long, but isn’t there anything sacred in life any more, such as Don’t Lie…

Photo: Dyanna Hyde

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily residential real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben is a licensed Realtor with YOCUM Realty in Lima, Ohio. He is also the author of Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.

54 Comments

  1. Excellent article, Ben! (I loved your podcast and love your perspective and approach.) I would have a difficult time lying to anyone, and feel that honesty is the easiest and simplest way to work with people. Thanks for offering this sensible and practical way to work with people. It makes sense to have confidence and be at peace with yourself when working as a landlord.

  2. I too have been wrestling with this.

    My problem is that my tenants think that because I own property I have lots of money.

    They then seem to be resentful of the fact that they have to pay me rent when they are about the same age as me.

    I have seen this more than once.

    Despite this I agree with the Author. Integrity dictates that you be forthcoming and truthful.

    I believe in being a straight shooter. I worked in Thomas publishing company
    and one of the values the corporation lived by was Straight shooter.
    Say it plain and keep it in the open. I do feel uncomfortable when tenants ask me how many properties I own. However, It is for them to work it out.

    • Steven,

      I know what you are saying about “resentful”. I am not willing to apologize for being educated and entrepreneurial – you know what I mean. I don’t drive a beamer – too much horse power for tenants. I am respectful and expect the same…

      Thank you so much for your comment!

    • I dont understand this. I think you have something in your mind that is not the case. Having been a renter and a landlord, its fairly straightforward. As a renter, I assume that the rented apartment is a service that is being provided to me. I expect the service per the lease agreement that I signed. Whether its from a landlord, property manager or whomever, it doesnt matter.

  3. Great article Ben! I completely agree with you. I always tell the people that I am the owner, and that I live right in the same zip code. I do not dress or act “high-falootin” (is that the right word?) so I don’t think anyone assumes I have a lot of money. I think they are more confident that the landlord cares about the property which goes along with self-management.

  4. Brandon Turner

    Ben,

    I agree 100%! I believe lying to one’s tenants is one of the worst things you can do, not just ethically but relationally. Like you said, there isn’t much in life that is sacred but our word.

    That said… 😉

    I don’t believe anyone I know suggests lying to your tenants.

    Everyone I know advocates the oposite – tell the truth 100%. And don’t BE the owner.

    Simple.

    Give the property away and don’t own it. For me, I give it to an LLC that I, along with my wife and potentially several partners have ownership in. It’s very different from ownership. If a tenant asks me “Hey – do you have any interest in this property?” Yep – I’m part of the LLC that owns it. No problem, no lies.

    But do I own it? I believe if I said “Yes” I would be lying – and as you said, it’s wrong to lie to your tenants.

    So my question to you Ben is this: Are your properties in an LLC, trust, or any other kind of legal entity? If so, then you are lying to your tenants by claiming you own it and frankly, I think that’s wrong. Why must you deceive your tenants in such a manner? The state doesn’t believe you own it, the IRS doesn’t believe you own it – so why do you try to convince your tenants that you do? 😉

    Okay – I’m just messing around. I know I’m not changing your mind on this one bud. We will be locked in an eternal debate. And that’s okay. That’s why we love BiggerPockets – to have these conversations!

    • I am buying a plain ticket right now to WA – ganna grab and shake you man. OK – this mat not be the best idea considering you are 6 foot HUGE, but you get my drift.

      Semantically and legally you are right. Although, I wonder if you would have a fun time in court proving that you don’t own the building which is in a single-member LLC and YOU ARE THAT MEMBER! AGH…shaking you in my mind right now…in a loving kind of way 🙂

      Brandon – we agree on everything, but we may need to disagree on this. I am at my property all the time; I talk to my tenants; I tell them that I am proud of my property and want their help to make it a great place to be…regardless of what entity holds the deed!

      On second thought, may be I still will buy that ticket to WA – I hear its nice there – nice people live there 🙂

      • Brandon Turner

        Haha thanks Ben. Yes, we may agree to disagree. And yes – a judge may not agree with me in principle, but legally I think they would. (I think!)

        Fly out here. It’s great! We’ve got this great feature called “Trees” that I know you people in the midwest do not have. It’s truly a sight to behold.

        🙂

        • Melissa,

          As to the letter of the law, obviously you are correct. However, the argument we are having is relative to the synthesis of what is law and what is moral. I don’t think that anyone here would disagree with your assessment of legality, but…

          Thanks for taking the time to read and comment!

  5. Ben, I have my families safety to think about. There was a landlord killed by a tenant not 1 mile from my house. According to all that knew him, he was an upstanding guy and super friendly. That didn’t stop a crazy person from taking his life.

    They don’t need to know my name. With today’s ability to google search everything about someone, imo its foolish to give any information out. I’m no lawyer, but I imagine it also makes it easier to pierce what ever liability protection you may have.

    I’m an honest landlord and try to do right by my tenants, but I’m also aware of the dangers out there.

    Jason

    • Your job is to provide a safe, code-meeting place for your tenants to live. I don’t care if you call yourself a UNICORN, not landlord, so long as you’re providing them a nice place.

      Your tenants job is to pay you. Period. Your job is to provide them a nice place to live. If the tenant wants to call themselves an elf, or you want to call yourself a unicorn, property manager, or what have you…. so long as the tenant pays and you provide suitable housing, that’s all that is needed.

      And, wow, I’ve never heard of something so horrible happening to a landlord!

      I think it’s a best policy to NEVER, NEVER tell a tenant you own it.

      Tell them you manage it. You do manage it, after all. First name only if possible.

      Like you’ve said, tenants assume landlords who own property have money… and often try to take advantage of this fact.

      Tenants think landlords make a lot of money every month and expect perfection. If you’re the property manager of some seemingly large corporation, you’ll get a lot more slack. Every home has it’s flaws. Tenants are much more reasonable to businesses and less reasonable to owner/landlords. They expect you to go above and beyond. Air conditioning goes out? They’ll want you to give them hotel money. They see a bug in the house? They’ll expect you to personally fumigate weekly. They have some dust from a repair you made on their floor? They’ll call you and expect you to sweep it up instead of taking 5 minutes and doing it themselves.

      I like the idea of putting the property into an LLC so technically you’re no the owner. Whether it’s a white lie or not, I wouldn’t jeopardize my safety or money just to tell a tenant I was the owner. If it’s in an LLC, it’s factually accurate. You DON’T own the house. Your LLC owns it. You manage it.

      Even a quality landlord who takes good care of their properties should find a way to protect their assets, their privacy, themselves, and their families. It’s just not worth it to tell tenants you own a property. They’ll expect way beyond what’s reasonable. And, if you have to evict them, some might cause huge problems for you personally. Not worth it.

      20 or 50 years ago, telling a tenant you own a property might have been fine. These days, especially with low income properties, you’re much safer if you don’t tell them. Evict a low income tenant in the ghetto who “knows people”…. you might have an enemy you don’t want. All to avoid telling a white lie…. it’s not worth it these days.

      What are we thinking the tenant is lying about here? Either they pay rent or they don’t. If they don’t, evict. Either they follow the lease or they don’t. If they don’t pay, evict. Either you take reasonable care of your property and provide them a place to live in return for their rent or you don’t. If you don’t, they’ll sue you.

      Whether you call yourself property manger, landlord, or unicorn, so long as you’re handling reasonable repair requests and providing them a place to live and the tenant pays you rent (and follows the lease), that’s all that is necessary and needed.

      • Jon-Kir,

        Wow – thank you for your post. While there are no absolutes in life. as a general rule of thumb, ease or difficulty of management is teed up by the property itself. If you’ve bought the right kind of property, in the right kind of demographic and location, with the right kind of layout and amenities, the process of management is a lot easier. The reverse is true as well. So the real trick is to know when to act and when to walk…just a thought.

        Thank you so much for taking the time to respond!

  6. I have done both, and have had less issues with being the property manager and not the owner. Many tenents think you pocket that money every month and feel your house should be perfect. Seems like many expect more out of a mom and pop situation as oppose to a business entitity.

    Just the impression I got. We have two older homes in good condition but they are no Post Properties..lol.

    • Imac66,

      If it comes up, I actually teach my tenants that I don’t pocket the money – call me crazy, but my tenants are intelligent enough in my estimation to comprehend the reality such as it is. Ive never had anybody not understand that I must make a mortgage payment, and if they don’t perform according to their lease I must find someone who will…just me.

      Thanks so much for your comment :)!

  7. If I bought another large complex again I would have a property manager full time instead of doing things myself.

    My time is worth too much to do 8 to 10 an hour work. Most of my clients never go to the property. You put structure in place from the beginning where you never have to be there. You have to buy the size and scale that support this (generally about 50 units or higher) and price in your offer accordingly. I want the PM as a buffer and the maintenance person. I do not want people calling me, having my contact info, etc.

      • Hi Ben,

        I make much more money transacting for commercial deals. 5 to 6 figures at a time.

        I have no interest in property management as it is not something I am passionate about and is low level per hour return for the headache. I love putting together and closing deals. Property management has very little to no money in it. I have friends who have hundreds of properties and they make a decent living managing for others but I can transact and do much better.

        • Joel,

          Here is the thing – and this is only a thought. Most of us begin to buy income-producing property because we are looking to get away from earned income. Even when this income is high, in which case you are very fortunate indeed, but should something arise in life which stops you from being able to trade you skill for money, you are in trouble.

          When we are young, we don’t usually think about this. However, if you had to be tied to a wheelchair or a bed, would you still be able to put together and close those deals? If yeas, then it’s a good business system. If not, then it’s personal service and I hope that you stay healthy and able for a long time.

          Management systems for my units is certainly not sexy. But, once implemented, other people will ensure that the system functions – passive cash flow. Just a thought 🙂

          Thanks so much for your comments indeed!

        • Joel,

          Building systems is not a high-paying enterprise nor is it sexy, but over time it leads to Passive Cash Flow. High income is good – so long as you are healthy to go get it. Do you know what I mean? Could you still put these deals together and close them if you were in a wheel chair or worse? If so you’ve got a good business, if not you’ve got personal service, which means 2 things:

          1. You pay a lot of taxes
          2. The money stops if you can’t be there.

          This is why I buy income-producing property and build systems. But, as they say, the jury is still out and you might be right. One thing is for sure – this has the makings of a very interesting debate 🙂

          Thanks so much for your comments!

  8. I think there are obviously risks to being the owner as other have described but what I believe is missed is the massive opportunity. What better marketing than me, the owner working on ny properties, taking care of issues, personally meeting tenants and neighbors. I do not have to fill vacancies the few times I get them ( none in 3 years). I get inquiries regularly if there is anything else available or of I am looking to buy another place. I also get to make a lot of contacts and get the inside track to one of my tenants’ friend’s brother who is looking to sell. I love being the owner with all the risk and reward that comes with it. At the end of the day my service will be greater marketing than I could afford at this time in any other fashion.

  9. “Question: If you lie to your tenants, why should you expect your tenants not to lie to you? And if your tenants think that it’s OK to lie to you, how long do you think you will last as a landlord?”

    Exactly.

    Plus, you never know when a tenant will be in the position to provide a reference of some sort and that tenant may answer “The owner lies when it suits his or her own purpose. I cannot vouch for this owner’s truthfulness.”

  10. Trying to decide if this is “Lying” or not to your tenants is as difficult as trying to explain the difference between Persuasion Vs Manipulation or Confidence Vs Arrogance. It comes down to an individuals perception and that’s the key to what determines a lie or a truth.

    If the tenant asks “Are you the owner?” I say , ” I do have a say in what happens with the property, but if you have any problems, as acting manager I’ll see what I can do. Any other questions?”

    In government and the IT Security business there’s a practice called ” The Principle Of Least Privilege And The Need to know”, Generally means Users/Employees are given roles to function in with just enough knowledge or power to get their job done. That’s for the safety, security, and simplicity of the business & business owner.

    I apply that same principle to real estate as there are multiple roles in my business. The Tenant’s job is to like the house and pay the rent. If in my business structure I’m labeled as manager and owner, I can’t be lying.

  11. Great article. I’m fairly new to this myself, coming up on my first tenant change. I liked and incorporated a lot of what I read on this page, but this was one piece of advice here that never felt right to me.

    When my first tenants new they needed to move out at the end of their lease for a job change, they gave me about 5 months notice. They were also OK with my showing the place to new prospective tenants on a few occasions with adequate notice. As I’ll have nearly no down time between tenants, I agreed to refund them a week of rent at the end of their lease since they wanted to move 2 weeks early. New prospects met current tenants and only nice things were able to be said about me. I feel like this sort of positive reference is often overlooked.

    Perhaps it’s because I’m not jaded yet, but I try to be fair and reasonable. Treat people as you would like to be treated.

  12. Amen Ben! Brandon’s argument regarding an LLC is just an elaborate rationalization as far as I’m concerned. How would Brandon’s tenants answer his question “Is it a lie to tell the tenants you’re not the owner” if they knew the truth – that his LLC is a single member corp? I’m pretty sure I know what their answer would be and that is the REAL answer to the question. Perception is everything.

      • Love it Kim – all of it. I pick you on my team, and I am confident as to our chances against Brandon Turner and Co. Kim – if you frequent BP you likely know that Brandon and I are brothers from different mothers about 99% of business and life. We will have to disagree on this one for now – but I promise Kim, I am working on him LOL 🙂

  13. Jeff Brown

    Is the INTENT of the landlord to deceive the tenant? Yes or no? Case closed. Semantics is camouflage for deceit and deception. I used to deny ownership. I had kids. I stopped that behavior. Case closed.

  14. It’s simple. Get a PM company and do not talk to the tenants. Case closed.
    I don’t want to be their enemy and I don’t want to be their friend. I have been down that road before with 20 units.

    All I want is to look at the monthly reports and treat the property like a business. I don’t have time anymore to do otherwise. As you scale your investments need to take on a purely business component.

    That is just my belief. Others want to change the world one block at a time and I say if you want to do that it is commendable. I just do not want to spend my life doing that sort of thing.

    • Joel,

      I will forever manage my own investments. Why? Because I can do it better than anyone!

      If that wasn’t the case, there are better ways to invest than buying physical property. Now, I think we are getting confused between managing and micro managing. I have a friend and mentor who has 650 units – he manages them himself. He has an office and maintenance crew of about 12-15. He has systems in place as any business should. But it’s HIS business and his kid’s very bright future, so he is in the office every day. Not micromanaging, but managing. This wasn’t always the case – it used to be him and his wife.

      I don’t know if this speaks to you, but it does to me!

      Thanks so much for commenting!

  15. I find the righteousness of all the people that are condemning those that say they are “The Property Manager” rather then come out and say they are the owner pretty ridiculous.

    Unless you name is on the deed then if you say that you are the owner you are LYING!
    Cut and dry, you are knowingly saying a factually untrue statement that is supported by the easily verifiable facts of the situation.
    It is a lie of convenience since you want them to know you are in charge but don’t want to take the time to explain WHY you are in charge, even though you don’t own the property.

    If you think it is most beneficial to have that kind of relationships with your tenants that the “Buck Stops Here” and you are totally in charge that is great. If telling them you are the owner is a LIE you can live with I’m not going to judge.
    By the same token if you want to just have them see you as the property manager, since one of your roles in the company is as property manager (You can tell them you are the marketing director or the acquisitions manager too, but they probably don’t care…), I think that is fine too. Personally if I was taking this role and someone asked me if I was the owner I was explain briefly that a company owns the property but that I am part owner of the company.

    I don’t think one should ever intentionally deceive anyone, but I don’t see any reason to volunteer extra information that is of no real use. If they need something it doesn’t really matter if they are talking to the owner or a property manager as long as the issues is taken care of and on the other side it doesn’t matter if they give the rent to the owner or to a property manager as long as they pay as agreed.

  16. Shawn, thanks so much for your comment!

    Question – who is the owner?
    Answer – Shawn’s LLC

    Question -whose job is it to perform maintenance?
    Answer – Shawn’s LLC

    Question – Does Shawn’s LLC have hands to be able to pick up the phone and call-in the repairs?
    Answer – No

    Question – Who’s job is that then?
    Answer – Shawn’s

    You see Shawn – ultimately in this arrangement, even though the LLC takes the tile, you as the managing member hold the key to how things run; you make the decisions…the rest of it is just semantics in my opinion.

    Thanks a lot for your comment!

    • Who is Shawn? 🙂

      Question – who is the owner?
      Answer – Shaun’s LLC

      Question -whose job is it to perform maintenance?
      Answer – Shaun’s LLC

      Question – Does Shaun’s LLC have hands to be able to pick up the phone and call-in the repairs?
      Answer – No

      Question – Who’s job is that then?
      Answer – “Bob”, the managing member of the LLC that has no ownership interest but unfettered decision making.

      Bob should tell the tenants he owns the property.

  17. Matt Menning on

    Hi Ben, Brandon, and everyone else… 🙂

    I am a bit torn on this subject, especially after reading this article and Brandon’s. I live in a duplex and my next door tenants know I am the owner, but I also have several other multis where I never interact with tenants as a 3rd party manager is completely responsible for day to day operations. So, what I’m saying is that its almost a non-issue for me 😉

    However, it still really has me thinking, and I wanted to ask is how you think each conflicting point of view stands up when faced with a tenant who is 110% deceitful, controlling, dishonorable, etc.

    Do you think you can overcome the nature of such a person by being 110% the opposite, a real ‘straight shooter’, really bringing a new point of view to a previously bad person?

    Or do you think it is better to withhold information so that the dishonorable tenant knows less about you and has less to work with when they try to ‘screw you over’?

    I think it’s a very tough question. I think ideally, you would have enough interaction with your tenant to know whether they are a trustworthy and honest person… before you reveal any details about yourself as the landlord/owner. But I expect this is rarely the case.

    Would like to hear your thoughts on this specific type of tenant…

    Thanks,
    Matt

  18. In my opinion, you don’t need to present yourself as a manager in order to create the buffer that we’re talking about. As a landlord, I work with a property manager who has more years in the business than me. Tenants see him as strict and *me* as benevolent.

    Whenever I have a problem with a tenant, I tell them about the terrible things that would happen to them if I let my property manager “roam free”. Then, I propose a friendlier alternative. It works well and it’s 100% honest.

    • LOL I can’t argue with what works Jon. O manage my own. When I am so large that I have a full office staff, the a manager will indeed manage things for me, but I will still be managing the manager. In other words I will be in essense working with a management co. and through a management company, but it will be my system, my hand-picked people, and they will answer to me. With 100-200 units it’s just too costly to outsource management…

      Thank you so much for commenting!

  19. Tim Chasteen

    Yes, this is contradictory to a suggestion Joseph Neilson mentions in his book, “Buy & Rent Foreclosures”. He explains that he always blames things on “the investors”. I believe he was talking about using this approach when managing contractors that want paid now, even when they didn’t meet the terms of the contract.

    By blaming it on a third party it can help prevent anger from the contractor that may result in damaged property, lower quality of work, or a physical confrontation. However, I think those consequences can apply to a tenant as well.

    I agree Ben, that honesty is always the best approach. For me this is an issue of prioritizing between moral value and effective management. I appreciate this article as it has caused me to reconsider the original advice I picked up from Neilson.

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