LANDLORDING – IT’S NOT WHAT WE THINK THAT MATTERS
It was my wife’s thirtieth birthday. We were driving home through southeast Texas, in Hamilton County. She was driving when the radar detector lit up and sounded off. Of course she checked her speed. She said that she was going the speed limit. I looked over and saw another car passing us. It wasn’t long before the blue lights lit up behind us. The officer gave my wife a ticket for speeding. I’m sure driving a red Honda CRX helped divert attention from the dark four-door sedan that passed us.
We knew the instant when the officer used the radar to check our speed. And that it recorded the fastest of multiple cars.
The truth didn’t matter.
In the officer’s view, the red car was speeding. And my wife got the ticket.
As landlords, we are driving the red sports car. Our tenants see us as the rich guy. Media sees some of us as slum lords trying to squeeze every penny out of our tenants. And some politicians see an opportunity to get votes from the third of the country who are renting.
A GROWING PROBLEM
Many states and cities have proposed rent controls. There is a proposal in Congress for a National Tenant Bill of Rights. There are many more tenants in the country than landlords, so there are potentially many more people inclined to vote for politicians who are in favor of protecting tenants.
The press gets attention with stories that stir emotion, like how rising rents are causing more homelessness and the lack of affordable housing.
As landlords, we are struggling with rapidly rising costs for insurance, taxes, and maintenance while tenants and some people in the government think we are supposed to keep rent increases to a minimum.
As landlords, we seek to maximize income. As syndicators, we also have a fiduciary duty to our investors to maximize income.
Since housing is the largest single item in many, if not most, household budgets, it is a natural target when the rent goes up.
As landlords, we have failed to communicate well with some of the influential people that matter: our tenants, media, and elected officials who make our laws.
Here are a few solutions to help communicate with each of these unique groups.
ONE. Help Our Tenants Understand
Our tenants are our greatest asset. An empty building generates no revenue, but still incurs expenses. We call a property with negative cash flow an “alligator” as it will eat away at our cash month after month. A good tenant in the building, one who pays market rent on time and takes care of the property, is a great asset.
To keep them as great assets we need to help them understand a few things.
Rent will go up every year. In the annual rent rate increase letter I note that costs for taxes, insurance and repairs have increased. I also like to include comparable rental rates. These can be obtained from Zillow or Apartments.com.
We let them know we value them as residents and reward their loyalty by keeping their rent below market, even if it is only $25.
And we have to be proactive as responsible property managers. Maintenance requests need to be handled promptly. The property needs to be maintained well.
TWO. Help The Media Understand
To help the media understand us, we should be asking, “What are we doing to help the media?”
They want good stories or stories that drive emotion.
How can we make a good story? What makes us unique or stand out and grab emotion? One example I liked was John in Indianapolis who uses some of his IRA money to buy apartments, some of which are used to provide housing for veterans.
Another way is volunteering as part of a larger real estate organization, such as supporting a Habitat build or working at a homeless shelter.
The lack of affordable housing is a huge issue right now. How are we helping to be part of the solution to the affordable housing crisis?
Local magazines like to publish stories about local businesses. Does your property serve a niche? Is it located near a veteran’s facility? Have you taken a property and improved the curb appeal, making the community a nicer place to live?
Many landlords do not just buy properties and rent them. They start with neglected houses, some of which have sat vacant for a period of time, then fix them up and turn them into affordable housing. Many apartments have a similar story. An investor group buys the property, fixes it up and makes it a nicer place to live, and continues to provide affordable housing. During the process, renovations employ local residents. Afterwards the ongoing property management team uses local residents for performing maintenance.
Our story may or may not make it into the traditional media. However, we can post on social media and let others know the good things that are taking place. Such as how we are using retirement funds to provide affordable housing in the local community. We are moving money from Wall Street to Main Street and investing where people live.
THREE. Help Our Elected Officials Understand
“Politics is like Thanksgiving dinner. We are either sitting around the table talking about what’s for dinner, or we are on the table about to be carved up.” – Jeff Watson
Real estate is local. We don’t need bureaucrats in Washington telling us how to run our local businesses. But we do need a voice in Washington who understands us. Jeff Watson is one of those people. He has fought on behalf of investors and Realtors to get changes made to Dodd-Frank seller financing rules that were restricting economic recovery. You can learn more about Jeff and his firm here.
Rising rents and the lack of affordable housing have some officials in Washington believing we need more rent control and restrictions on landlords. But the issues are really more complex and stem from inflation, rising interest rates, and a growing population. Restrictions on landlords will further constrain the housing supply and exacerbate the housing crisis.
Help your Senators and US Representatives understand that housing issues such as rent control and tenant rights need to be left to local officials to address.
Our state and local officials are more in tune with what is going on in our communities than US Congressmen from other states. They know better what the housing needs and issues are.
We can keep aware of state and local legislation through local apartment or real estate investor associations. The best associations are proactive when it comes to legislative issues concerning real estate and will alert you to legislative actions as they progress.
When it comes to landlording and managing rental properties, it’s not what we think that matters. It’s the perception our tenants, the media, and our elected officials have. They can work either for or against us. And we need to remember it is our residents who are our greatest asset.
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Mike is a retired aerospace engineer with a passion for real estate investing and teaching financial literacy. He lives with his wife in Daytona Beach, Florida.