November 2011

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There are a lot of things we take for granted now that we are at that time of year to take a moment to reflect and to show our appreciation towards not only our families, but to veterans, co-workers, friends, etc.  But the one thing I have always noted is the lack of appreciation that  landlords rarely show to their tenants, especially the good tenants.  Many landlords spend a lot of their time with issues of problem tenants from fixing regular wear and tear to major breakdowns to evictions.  But before they go pointing a finger to those tenants, many of these landlords forget that three fingers point back at themselves.  Mostly, because so many of them do not do their due diligence when it comes to checking out their potential new renters or they hire poor managers or fail to train their management team.  In the end, it still falls on you the landlord to follow through in everything you do.

However, returning to the main point of this month’s newsletter, landlords and property owners often fail to appreciate those good tenants and or good opportunities in front of them.  Most often, it doesn’t take much to show your appreciation.  Napoleon Bonaparte once said that a “small piece of ribbon will go a long way, in terms of reward.”  He was referring to instead of rewarding soldiers with extra pay during cash strapped military campaigns, he was talking about showing appreciation of military valor and loyalty with “ribbon awards.”

Your rewards can be as elite as a $50 or more gift card to discounted rent during the month of December (most appreciated during the holidays when expenses are tight) to a small gift of food or other object for on time rent or for very little maintenance to property (even better when the tenants take the initiative to improve upon your property at their own expense — these tenants are extremely rare now a days—treasure them!!!).

I have personally watched several investors lose terrific deals and tenants over the most inane expense.  Most often everyone loses, especially the investor, when he fails to create a win-win situation for all involved.  We once witnessed a homeowner lose not only great tenants who wanted his home but the opportunity to sell his old home for $200,000 in a very bad economic situation. Because he refused to not only to let them do small improvements to the property without asking for additional pay, but he wanted to hold out on selling to them because he wanted to wait for better economic times and to completely pay off his home so that he could have that total cash value (more taxes to pay on).  Eventually, his tenants got frustrated with him and left looking for another home since “he couldn’t make up his mind.” 

He rented again, only to have “the tenant from hell” wreck his home leaving him with a bill in eviction and home damages up to $25,000 and unable to rent again for about three months (3 months income lost) until he found new ones.  To this day he is stuck with a piece of property that neither he nor his tenants want and is unable to sell his home for the $200,000 he wanted originally even though times had improved moderately.

He was short sighted.  He did not see the long term picture.  If he would have sold it when the original tenants that wanted it he could have taken the $190,000 (less taxes or do a 1031 exchange) he would have received after the sale and paying off the rest of his owed mortgage and then taken the cash to re-invest it into something with more income for him.  Nor would he be saddled with an unwanted property and the additional $25,000 bill (2nd mortgage) to repair his damaged homestead.

Likewise, but on a smaller scale, a landlord could have gained an additional $200 extra a month (from $500 to $700) if they would have simply painted an entire unit before renting their unit out again.  Refusing to paint the entire unit (about $300-500 in supply and labor), their unit sat on the market for an additional 3 months before they were able to find someone interested in the unit and even then, the landlord had to coax them in by lowering his rent by -$100 ($400) each month because of the unsightly patch paint job that he had done.

It is this short-sightedness that gets many a landlords in trouble with their investment properties in where they can quickly become upside down in their investment.  So, think ahead—especially, in the long term.


Crissy and Johnny