Tenants: Customers or Scum?

A couple of weeks ago there was a posting on the Bigger Pockets forum where the poster described their tenants as SCUM… (don’t go looking for that discussion, it has already been removed from the system).

While the poster did get enough thoughtful responses to address their question, the dialog quickly deteriorated into insults regarding the posters use of the word scum to describe their tenants. I should add that the particular tenants being discussed were Section 8 Government assisted tenants.

As I watched this discussion develop and in further discussing it with my wife I got to thinking about how landlords view their tenants and thought this might be a great topic for discussion… and hence this article.

For those landlords out there who have been in this business for a while you know where I am coming from when I say that there are good tenants and there are bad tenants. And that some tenants may indeed be considered less then desirable…

I can honestly say that I have only had one tenant who might come close to being defined as SCUM and this tenant wasn’t a Section 8 tenant. (I will save that story for another article focusing on how to deal with personality disorders and hoarder tendencies).

Now, I know that some tenants can be very challenging. In fact in my experience I believe that the numbers regarding good and bad tenants break down something like this…

10% of our tenants are perfect. Rent is paid on time. The property is in pristine shape and you almost never hear from them

80% of our tenants hit our radar screen from time-to-time but are otherwise good tenants. They make an occasional late payment and have maybe a maintenance issue or two… but otherwise they take very little of your time.

10% of our tenants are real pains in the BUTT. You know who these tenants are. Their rent is always late, and you are always in some stage of evicting them. They constantly complain and the wear and tear on the property is demonstrative. And,

Based on my experiences, every-time you get rid of bad tenant… it seems one of the 80%s steps up to take their place — and that is the life of a landlord. But I digress…

Given the importance of tenants to your business, I am perplexed that any landlord could have an opinion that their tenants are scum! In many regards, I believe our tenants are very much like customers, or perhaps as one guru describes them… employees.

Think about it. Our tenants go to work (hopefully) everyday. They work hard. They get paid. They spend a portion of their earnings on shelter, a shelter you own and they are paying for. And, if you purchased correctly your customers are not only paying your mortgage and other expenses, but they are providing you with positive passive income as well.

How could you as a landlord consider someone who is paying your mortgage (even if the Government is providing most of the rent) SCUM?

It defies logic… wouldn’t you agree?

To be sure, it is the rare tenant who arrives at your doorstep who automatically makes it into the top 10% of those near perfect tenants described above. But what can you do as the landlord to help every tenant at least fall into the 90% who can be classified as good tenants?

It’s not what can you be doing, but what you MUST do to ensure that your tenants know they will be treated fairly and consistently as long as they follow the RULES.

And what are some of these rules?

Rules for Managing Your Tenants

First is a rule for you the landlord; tenants pay your mortgage. Screen them thoroughly, select only the best, treat them with respect and never, ever deviate from your policies.
Once selected (and selecting tenants is the most critical job you will perform) your entire relationship with your tenants is defined by your lease or rental agreement. Make sure this document contains everything you need to effectively manage your tenants.
Train your tenants constantly. If in doubt just follow items one and two above, never deviating from your policies and follow your lease. When tenants want to push the envelope, don’t hesitate within the constraints of your lease, to push back… hard!
When dealing with tenants, don’t let their emotional outbursts drive your responses. This is advise I have trouble following, but my wife on the other hand was a master at defusing outbursts by removing herself from the situation — usually by calmly stating in phone conversation that she couldn’t assist the tenant if they insisted on yelling and screaming and then should say good-bye and hang-up. I can’t tell you how effective this was as a way of gaining control of the situation and TRAINING every tenant to understand that if they wanted things done, they needed to be respectful.
Never pass up an opportunity to train, train and train some more, every tenant you have. In case you haven’t noticed I am a huge proponent that when you spend time to train your tenants regarding how your business is run and how you want them to live in your properties, the number and severity of the issues you experience with your tenants will diminish fast!

The bottom line is this: your tenants are NOT SCUM and are actually a very critical part to your business. And, just like you wouldn’t expect a new employee to understand the ins and outs of their job without training, neither can you expect the same from your tenants without you spending time training them.

In closing I will leave with this…

On sure measure of the success of the principles I outlined above were the numerous phone calls from our previous tenants (tenants who were renting from us when we sold our portfolio in 2006) who sought out our advise on how to deal with their new landlords who had no standards and who had no idea how to manage their rental properties. While it was gratifying to be approached by these tenants, it was a shock to realize how many landlords were clueless…

Sadly, I still see that trend today!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.