Real Estate Investment Rental Properties - To do, and Not To Do
Real Estate Investment Rental Property Rule #1: Your tenants ARE NOT your FRIENDS!
Oh boy!
We're going to get some heat for this one.
I can see the nasty emails pouring into our inboxes right now.
When you bought a real estate investment rental property you did it to increase your cash flow, not to meet new people.
I know that in this world of "social media" where everyone is supposed to be your friend - or that's what the "experts" are telling you anyway - how dare we write something like this.
If we weren't trying to truly be of help and assistance we likely wouldn't!
So here goes...
You've heard of the saying, "What have you done for me lately?', right?
We used to use that in direct sales with the sales teams.
You forgot what was sold last month, that only thing that mattered was this month.
Or you forgot what was sold last quarter, because this quarter "Was the most important quarter in the company's history!"
You get the idea!
"What have you done for me lately?" was the rallying call from the CEO all the way down to the sales team on the street. Personally, we both don't behave or act with this advice.
We believe in long-term relationships, especially with people we work with or have worked with in the past. Maintaining a stable relationship with the people occupying your real estate investment rental property is not a bad idea. Don't get us wrong.
What have you done for me lately? That's our personal philosophy.
And that's a very key point. It's a personal choice.
The market, better yet, your tenants, don't work this way.
They have a very short memory.
Your past actions and goodwill have quick expiration dates and become worthless.
You need to remember that.
We've been disappointed with different situations countless times.
We've handed out Christmas baskets and "welcome" presents to tenants only to have that goodwill quickly forgotten when a plumber hasn't arrived on their doorstep within 20 minutes of their call. We're responsible for our real estate investment rental property.
Or when we don't allow late payments for the 5th month in a row tenants that were once so nice and friendly get just a little annoyed with us.
To be fair, this isn't always the case.
As we learned in Grade 10 math, there's always the one exception that proves the rule.
For example, this is not with student rentals for some reason. Goodwill with students seems to carry a lot of weight. There are a lot of people with students in real estate investment rental property. Your goodwill can go far with them.
Maybe it's because 90% of other landlords treat them so poorly, who knows.
But just being aware of this won't relieve you from the occasionally disappointment with tenants, but you should no longer be taken by surprise.
We've seen enough, done enough and been around enough to see other property owners shocked with their tenants behaviour - especially after they thought they had become "friends". "Friends" don't pay you rent for your real estate investment rental property.
Well, we've got news for you.
If you want to position yourself as a "friend" or "family" to your tenants so be it.
But remember, they are not your friends, nor should they be.
Surprised that we're saying this?
Ah, maybe we're sharing too much today.
But we've seen so many beginner investors get burned, be disappointed and become discouraged we thought this advice was and is necessary.
Let's walk through this together...
Everyone is feeling great when a new tenant moves in.
You have some new rent money in your hands and the tenant has a great new property.
And to be clear...we strongly believe in OVER-DELIVERING with the property. It should be clean, better than other rentals, bigger, newer, nicer, on a better street etc.
We are total believers in giving more than we get.
That's our philosophy and we live by it.
But we don't expect others to live by our rules.
So we're never surprised by a tenants actions, especially when then give less than they are receiving.
When they're late on rent or treat the property neglect.
When they set unrealistic deadlines for small repairs.
Or when they demand massive repairs on a property that are not warranted.
We might be shocked, but never surprised.
This is a business after all. You bought a real estate investment rental property as an investment.
And to be very clear, we always do what is necessary, but we don't do everything that is asked of us.
Some of you reading this may be shocked that we think this way.
We're nice guys right?
Look, we're really trying to watch our for your best interests by sharing this.
Think about it this way....
Have you ever been to Disney world?
Don't they make you feel like family better than anyone else when you're there?
But what's the true nature of the relationship?
It's business right?
That's what we're talking about.
Tenant Landlord relationships are at their very core business relationships.
This does not mean you don't like your tenants and vice versa.
Just don't turn the relationship into something it's not. It'll be much easier to handle issues when they pop up, and they will, when you have your role clearly defined.
And remember, we really do believe in over-delivering. We're just "fully aware" of the true nature of the relationship.
Hope that's not too harsh for you this week.
Let's wrap this up with a story.
We had a tenant pay us rent late every month for over a year. It was late but somehow it made it to us by the end of every month.
Then they lost their job.
Because they paid us every month, even though it was late, we agreed to lower their rent by a whopping 33% for the next 3 months until they got back on their feet.
We were losing income on our real estate investment rental property out of the goodness of our own hearts.
They were "forever grateful".
A few months later they decide the house is not right for them and want us to do all kinds of unnecessary repairs. (This happens sometimes with a real estate investment rental property, more than you think.)
They then were late on the next months rent (they were back at full rent).
We served them notice on the 1st of the month and had them out of the property by the next month.
End of story.
That tenant had received a nice welcome basket from us and for Christmas some gift cards and a bottle of wine.
It was all forgotten. Quickly forgotten even.
Will we try and over deliver with our next tenants?
Yes.
Will we have a property that is better than those around it?
Yes.
Will we be shocked when the tenant stops paying or ask for something unreasonable?
Yes.
Surprised?
No.
Remember, this article isn't saying that you shouldn't like your tenants and that they shouldn't like you.
Just don't turn the relationship into something it's not.
Remember, it's your real estate investment rental property. Ultimately you are responsible for how it is used, and liable for that use, so make the best of it.
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