Although, as Winston Churchill so poignantly reminded us, “Without a certain degree if familiarity, we would find it quite impossible to breed anything”.
So, familiarity breeds contempt? A bold, categorical statement, some would say. No, not all tenants are created equal, just as all landlords are not. This is addressed to landlords who rent property to individuals or families that live paycheck to paycheck, exactly as some landlords (normally beginning landlords, real estate has an insidious way of bloating your net worth and cashflow if held long enough) do.
There is no discrimination in this statement, and a very simple “acid test”. When your tenant filled out his or her rental application (one per individual over the age of 18 living in the property, I sincerely hope, lest you fall prey to the trick of “George here, who has trashed the last 5 properties he rented, is only staying here for a few weeks), did their bank account balance (which your application surely asks for) equal at minimum several months of their total living expenses? If not, I’m talking to you.
Landlord or tenant, young our old, we all share a common denominator: life happens. Cars break down. Job loss occurs. Financial hardships hit us all, the difference lies only in the degree to which we have prepared for the onset of these inevitable “storms”.
I’ve been a tenant myself. I’ve rented to a good number. My friends have rented to literally thousands. Please accept the following as a law of human nature no more flexible than the law of gravity:
When money is short, tenants will almost always decide which bills to pay in order of descending negative consequences for nonpayment.
Allow me to elaborate: Tommy Tenant’s car breaks down, saddling him with an unexpected repair bill of, let’s say, $800. Tommy’s family budget has approximately $400 of discretionary income after all necessities are paid each month (and you’d be appalled to know what the less financially astute, landlords and tenants alike, consider “necessities”).
It is now time for some “real talk” in the Tenant Family household. Who’s getting paid, and who isn’t? This is where the aforementioned law comes in. No civilized person would go a full month without a cell phone, would they? Besides, the cell phone companies are SO inflexible. Plead how you may, they will cut off service if payment is not received. Ditto the cable company, car insurance, etc . . . And you’ve gotta eat, right?
Now, Tommy’s landlord is a real nice guy. Watched the football game with him just the other Sunday. If all Tommy has to do to keep a roof over his head is call his landlord and ask, plead, or threaten, can anyone else guess who will not be paid in this scenario 100% of the time?
I fell prey to this with my first tenant, and never since. I have literally seen it drive dozens upon dozens of landlords clear out of the business. I have bought a number of houses from such individuals, and thereby solved the largest problem in their life at the time, the one that kept them up at night tossing and turning.
What I learned from real estate teacher and veteran landlord Louis Brown changed all this. For reasons far beyond the scope of this article, it is likely that you would be best served from an asset protection standpoint by holding your rental properties in land trusts (no, this is not legal advice, ask a competent real estate attorney). When your property is in a correctly set up land trust, you legally and truthfully do not own the property. The trust does. You are the trustee, and are prohibited by law in many trust documents (all of the ones I use) from disclosing to anyone who owns the property without a court order.
So, Tommy Tenant, I am not the property owner, it is owned by the 123 Main St. Land Trust. I am the property manager. I will respond quickly and competently to all requests for maintenance or problems with the house. But let me tell you something- the owner is horribly strict about the rent being in on time. Rent is due on the first, and if not received, an eviction notice will go in the mail on the second.
Less than forthright? Never! You could stand in front of any court in the country and tell a judge that you do not own a property that is in a properly set up land trust (ie: by your attorney). It is up to the judge to ask or order you to tell him or her who owns the trust. Why on earth would you tell your tenant differently?
The main point here is setting up a non-adversarial relationship, where you are not the “enemy”, and no resentment will grow during conversations over the rent. At the age of 27, this was especially important to me. “This guy here is rich- he owns at least 2 houses, and I don’t even own one! He can wait for his rent”.