Tenants? WHO NEEDS THEM!?! (trust me, you do...)

[Douglass Benson]

This is long, so read at your own risk, but I hope that you will. I want to thank @lawrence moore who started the thread asking about owning your investment outright or leveraging.  That thread had some good discussion, but what caught my eye in that thread were the tenant related comments.  That is a conversation that I always enjoy - so I wanted to start a separate thread about it.  

My wife and I do business as Esker Properties, LLC. We own, operate and perform property management on 81 apartment units. We are comfortable with leveraging. The last deal we used private money for the down payment and borrowed the balance from the bank. Our own personal version of buying an apartment building with no money down!

Working with a local bank, I am prepared to leverage some of the equity that I have and with bank assistance purchase a 100+ unit complex. 10 years ago we had a single four-plex.  In those 10 years I should have been twice a big as I am now, but I have grand children that I love, a day job that I really enjoy and am a little more conservative than most investors.

So, what does this have to do with tenants?  All of it...

I have hundreds of conversations with real estate investors that fear the thought of tenants and that fear grows as the number of tenants grow.  I have met many people that refuse to own rentals or invest in real estate because of "those damn tenants".   I have met private money investors that won't invest in apartments because of the fear of tenants.  They gladly give me money when I am flipping a house, but are hesitant when I want to purchase multi-family.  

When renting, that is where the revenue comes from, that is how the wealth grows. The wealth STARTS when you buy a building located in a good neighborhood.  It grows when you start to derive revenue from that building and revenue comes from tenants.

My tenants have paid down hundreds of thousands of dollars of principal in the last 10 years and I personally haven't paid down a single penny. My tenants have paid to upgrade all the apartments and buildings that I have ever purchased - new windows (every single one of my units has them), new floors, doors, fixtures, counter tops, appliances, paint, etc., etc. and I have provided none of the funds.

My phone seldom if ever rings. When it does ring, it is typically a small maintenance issue (i.e. tub won't drain, window blinds need replacing, etc.). I pass the tenant contact information to my maintenance team and that is the end of it.

When I speak to groups, I always remind them that these are YOUR tenants, moving into YOUR buildings. If you don't like them or if they are bad guys, there is no one other than the person in the mirror that put those people in your building. For me, that is the key - good people living in good buildings located in good neighborhoods. I am forever grateful to and for my tenants. Sure I have some bad ones, but I once discovered, I make them live somewhere else. It is my fault they are in my building, and I owe it to my good tenants to make the bad ones go away. When that happens, it builds on the trust that I am trying to promote that I am work to provide a great rental experience.

So, who needs good tenants?  We all do!  

As you can see, I have a passion about all of this. Sorry it was so long, but I have a solid cup of coffee beside me and I couldn't help myself.