Are you a landlord or an investor?

[Ndy Onyido]

Hello BP Nation,

I have asked and been asked this question over and over again by friends. I know different people have different opinions on this and in this post, I wish to generate those opinions by briefly stating my views of what I believe are the differentiating factors.

According to http://www.thefreedictionary.com/landlord, a landlord is defined as:

1. One that owns and rents land, buildings, or dwelling units.

2. A man who runs a rooming house or an inn; an innkeeper

And what are his responsibilities? According to http://settlement.org/ontario (well, I live in Ontario), here are your responsibilities (I summarized them) if you are or wish to be a landlord:

§Keeping the home in good repair: You must repair and maintain the home, and obey provincial and city health, safety and maintenance standards. You are responsible for repairs even if the tenant knew about problems before agreeing to rent the home.

§Maintaining common areas: You are responsible for cleaning and maintaining the common or shared areas of the building, such as hallways and yards. You are also responsible for removing snow from driveways, walkways, etc.

§Providing access to vital services: You must provide access to hot and cold water, electricity, heat and fuel (e.g. natural gas). You cannot shut-off these services, even if the tenant has not paid rent. You may shut-off these services temporarily in order to make repairs. You and your tenant can agree that your tenant will pay for these services as a standard fee each month or based on what the tenant uses.

§Providing Heat: You must provide heat in the home from September 1 to June 15. During this period, the minimum temperature is 20C. Some cities and towns set additional requirements. You can check with your local government to find out more about minimum heat standards in your community.

§Providing documents: You must provide your tenant with a copy of the lease or tenancy agreement, and written notice of your legal name and address. If the tenant requests rent receipts, you must provide them. You cannot charge a fee for any of these documents.

Notice that all these are 'active' words-verbs used to describe the work of a landlord. A verb is a doing word.

In addition to these , he has to cope with mid night calls from tenants, handle lease documentations of boarding and onboarding of tenants, chase rent payments from late paying tenants, handle evictions, repairs and maintenance etc.

Well, count me out of all that! I will rather leave that to those specially trained and equipped to handle them, while I spend my time on the things that matter most to me….my family, friends and leisure: this is my target.

Let’s talk about the investor briefly:

According to http://www.investorwords.com/2630/investor.html#ixzz3lvQW5IZP, an investor is an individual who commits money to investment products with the expectation of financial returns.

His primary objectives are the returns from his investment. He is principally concerned with the numbers and invests with no emotions. He is focused and disciplined. If the numbers don’t make sense, he does not invest, period!

A landlord often has sentimental attachment to his house: its my first property, it reminds me of my childhood, I had and brought up my kids in this house; it must not be sold because my father bequeathed it to me….etc.

Ok. Let me take a pause here: frankly answer this question: Are you a landlord or an investor? And why do you think so?

[Steve Vaughan]

Hi @Ndy Onyido!  Well-written post.  Didn't want all your work you to fall to the land of the no reply, so figured I would chime in.

I am both. Landlording is the primary way I invest.  I also wholesale and lease option when convenient. I purchase property under market value with leveraged dollars and receive great tax benefits from doing so.  Other 'investments' tend not to offer such benefits.

I self-manage all of my units and have for years.  I've only received about 3 night time calls in 12 years. I don't clean my own common areas and am not providing heat or hot water manually, but I get your meaning.  Things do need to be kept up and maintained and I make sure they are done promptly and inexpensively.   The only way to do that (inexpensively) is yourself. You can hire the greatest PM in the world (if that's what you are implying as you spend your time doing what you like) and you can stroke the big checks while you're there.  Welcome to the world of $100 breaker flips and faucet drips.  PM forgot to turn off the valves in the winter?  Too bad. Pipes froze and you have a flood.  The property is not theirs and you'll know it.

I also consider myself an investor as a landlord because we are masters of doing something once, then receiving residual income from it for years.  I created a good lease. Once.  I fix up a property and bullet proof it once.  I acquire a property once and don't have to look for a new one next week, etc.  I have efficient methods of rent collection that generates it's own receipt, etc.  It's not the full-time job you portray at all.  Not to me.

True I am more 'invested' than one who just buys a business or paper security, but I can add value and have the satisfaction of ownership.  My asset values don't rise and fall with the Chinese dollar, Greece's insolvency or Congress holding us fiscally hostage.  

What other 'investment' gives you that kind of security and flexibility while you are hanging out with your family? Don't forget the tax benefits, bud. My effective tax rate has been negative since 2003.  Cheers!