My tenants are perfect. Well, not exactly.
There are a ton of horror stories out there about landlording, and I have experienced some whoppers, that's for sure! As many have said it, property management, investing in real estate and landlording is not for the faint of heart. It's true. It's not. Even at best, it takes a lot of courageous conversations.
But I can promise, I have far more good guy stories than bad. Far more insurance than claims. Far more income and equity than expenses. And far more fun than freakouts. I just want to provide an anti-horror story especially for landlords to-be.
For those who are teeter-tottering with buying and holding and are intimidated by the media-flashy-entertaining-horror-story side of the business, here are some things to chew on. It's just not as bad as often as people think. But a few notes first as to why my experience may be better than the rest...
First, it's a business. Remember that, but also remember while it's the investor's house, it's someone else's -- the tenant's -- home. And there is a difference. Respect is really important. No matter what goes on or goes wrong...
R E S P E C T O N E A N O T H E R
I may never know how much respect has bought me (saved me $) over the years. There is a way to be firm, direct, stick to the contract and still be respectful.
Next, (again) it's a business. Pay attention to the price you pay (initial purchase price + closing cost + the cost of all initial repairs or remodeling) vs. the rent you will receive. Study that first and most thoroughly, and you are on the right track on the initial purchase. Leave a margin for error!
And, (again) it's a business. Pay attention to the tenant applications thoroughly. I am ok taking on some amount of risk. But someone will pay for that risk! And it won't be me. Low credit due to history of late pays? Ok, simply consider a Letter of Explanation, evaluate the circumstances and then approve or require a double deposit for the higher risk applicant or no approval. Tenant screening and lease agreements, as related, are factors.
INITIAL PURCHASE + COST + INCOME + TENANT SELECTION = K E Y
I BELIEVE THERE IS A CERTAIN REAL ESTATE LAW OF ATTRACTION
I caught onto this my first year in RE. Pretty people buy pretty houses. And I am not talking about the outside. I am talking about the heart.
I thoroughly believe the quality of the product attracts the quality of the tenant.
If the landlord is slumlording, choosing areas in decline, cutting corners all the time, not fixing issues, then it's highly likely they will attract tenants who behave the same -- who don't mind holes or mold and declining conditions and even who contribute to the decline of the property the way the landlord is.
But if a landlord chooses nice properties, putting out a nice, well-maintained, relevant, modern product, they will attract tenants who are attracted to that and who maintain or better that property.
Remember the key above is selection of property, the right price, the right rent and... tenant selection or a lease agreement that matches the tenant risk level. That combo has been my key to success. No horror stories. Even when things went wrong they never went way wrong.
PART TWO TOMORROW... Some good stories...