Do You Have What It Takes To Be a Landlord?

Question

Do You Have What It Takes to Be a Landlord?

No question about it—not everyone is cut out to be a landlord. Landlording requires a lot of skills and a certain state of mind—some not easily learned or adapted to. Can you say “that’s me!” to all the following characteristics of being a successful landlord?

• I’m a risk taker. Real estate investment is a risk. You can make a lot of money—but, you can also lose all the money you invested and then some. Being risk averse will hold you back.
• I’m not cash poor. While some investment strategies enable you to dive into the business without extra cash on hand, owning rental properties isn’t one of them. You may need extra cash for vacancies, evictions, unexpected repairs or unpaid tenant utilities—just to name a few.
• I’m organized. While being organized may not be as critical when you own one property but, once you get a few more, being organized is essential. Simply forgetting what you put where can be frustrating, but even more important, not keeping files in order, etc. can lead to violations of lead disclosure laws, fair housing laws, etc. and leave you defenseless in case of a lawsuit. Remembering which unit or what tenant needs what is also important.
• I’m a detail person. Great! Because those that aren’t detailed people find themselves in a world of hurt when they forget to cross a “t” or dot an “i.”
• I’m not a procrastinator. Everyone will demand your attention once you’re a landlord—your tenants, the municipality, the neighbors to your property, and (hopefully not) the police. Ignoring tenant complaints, repairs, bills, etc. is a formula for failure. Also, not getting on top of repairs needed to resolve city violations can lead to fines, fees and potential prosecution.
• I’m a people person and don’t mind confrontation. If you hate talking to people or hate confrontation—being a landlord is probably not for you. While relationships with most tenants are great there are always the one or two relationships that go cross ways—past due rent, parties, unapproved tenants, trouble with the neighbors, housekeeping issues—things happen that involve a need to communicate. You may also have to deal with not so friendly city inspectors, utility personnel, contractors, or bill collectors—or the parents of your tenants.
• I don’t take things personally. Like with just about every business, there are likely to be times where someone will attack your integrity or call you unfair or callous or racist or whatever. If you’re the type of person that let’s what other people think or say about you get under your skin then you might not be ready for property management.
• I learn from my mistakes. You know what they say about doing the same thing and expecting different results…need we say more?
• I embrace life-long learning and change. The landlording business is always changing and evolving—laws change, tenant’s demands change, the neighborhood where your properties are located change. Landlords must be able to stay on top of new laws and be flexible in their approach. If you think you’re going to buy rentals and do the same exact thing until you retire or die, you’ll be sadly disappointed.
• I’m not obstinate or hard-headed. Great! Because if a landlord decides to draw a line in the sand with the city or with the justice system, things can go south quickly—very quickly.
• I understand that owning rental property is a business. Some folks just never quite figure out that owning rental property isn’t a hobby—but a business. It’s important to take being a rental property owner and manager seriously. Rental investments are a business. Rental properties are not an extension of our private residence—even if we’re house-hacking. Even if you don’t look at it as a business, others will and expect you to act accordingly.

With all that said, not everyone can be all things and none of us are perfect. So, what do you do if you couldn’t answer “that’s me to a tee” for all the above questions? Partner up with someone that has strengths that you don’t have. There are many successful partnerships in the business—often split between spouses. The most important thing is recognizing your weaknesses and getting help with those. Happy Landlording!

Audrey Ezeh · Answer

@Greg S., but then who will we buy our houses at deep discount from? 😀

Ross Denman · Answer

Account Closed I love this post. I have DIY landlords call all of the time because they are in over their heads. When things are going well, managing properties isn't that tough... but given enough time, something will go wrong. I just took on a client yesterday that attempted to previously evict their tenant and the judge wouldn't allow because they didn't give a pay or quit notice and accepted a partial payment. Then they told me that they believed Indiana was a very tenant oriented state (which is not true at all.) The tenant has also changed the locks and is denying them access to the home. They have no idea how to go about handling these situations and it appears that they have a tenant who knows exactly how to milk the situation. We won't have any problems straightening it out, but this entire expense is going to probably cost thousands in lost rents, legal fees, reconditioning the house, vacancy, etc. They chose to manage it themselves to save the $1,000-1,200/year cost of professional property management but they have lost considerably more than that and had to suffer many more headaches.

There are some really savvy DIY landlords here, but if that's the way that anyone decides to go, they have to ensure that they are educated and proactive.

Thomas S. · Answer

@Ross Denman

The saddest comment of all about our business is that probably 99% of new investors never even bother to learn their state landlord tenant regulations. What person in their right mind starting any other business would do that without learning the regulations governing their business...... None......

I have come to the conclusion in my many years in this business that landlord education and licencing should be mandatory.  No investor should be allowed to have tenants without first either passing a exam to get a licence or have hired a PM.

Put an end to unqualified mom and pop landlord.

Matthew Olszak · Answer

As I read your first paragraph, I was hoping you would say what you did in the second one. Every single other professional involved in real estate is required to be licensed and take an exam based on their knowledge of the regulations that pertain to them. Agents, loan officers, appraisers, etc - all required to be licensed.

Running rentals as a profitable business is one thing - shame on the landlord/owner (mom n' pop as you call them) if they are losing money every month. But ignorance or disregard for tenant/landlord laws is a separate issue. I cringe when I read ads that blatantly violate fair housing regulations. Or worse yet, when I see a cookie-cutter lease used requiring 30 days notice vs the 5 days permitted by law and granting all sorts of other rights to tenants that aren't required by law.

I equate some of these mistakes landlords make to a family-owned bar not checking IDs and just freely serving alcohol. Here in Chicago, there are multiple organizations that provide FREE landlord education programs. Many people just don't take advantage of those resources and it's a shame, not only for the landlord who is for sure losing money, but also for the marketplace because as those unprofessional landlords make mistakes and abuse the tenant-landlord relationship, the gov't finds the need to step in and as a result all of us are put under more stringent and costly regulations.

Andy Rumple · Answer

I started as a landlord and wasn't bad but dealing with details and more specifically adults acting like children all of the time turned me against it. Wholesaling is perfect for me because my patience with idiots is close to zero. I can eliminate dealing with idiots as a wholesaler very quickly. Sorry if I am cynical but that's what 10 duplexes can do to almost anyone unless that's your thing.

Thomas S. · Answer

There is a clear distinction between real estate investor and landlord. By far the vast majority of investors fail at being landlords. Without PMs they would not be in business for very long. Most novice investors do not even realise they are starting a business that comes with long hours, hard work and high stress.

Real estate investing, contrary to the common opinion, is extremely risky.  Like any new business the majority will fail and for that majority the primary reason is the inability to be a landlord. Having what it takes to be a landlord will make or break your investment but having a PM also requires considerable management skills which when lacking will also result in failure. Business skills are essential when making emotionless business decisions.

The biggest misconception about income property investing is that it is a passive  investment. Nothing could be farther from the truth for most investors. If you want passive give your money to a mutual fund money manager.

Mike Dymski · Answer

Good list.  I will add two items:

• I don't have a better use for my time (however you define it)
• I enjoy landlording

JD Martin · Answer

Ha! This made me laugh!

Owning rental property is more of a business than an investment, and there's not that much that's "passive" about it except that you receive rent without working for it directly on the spot. Outside of that, there's procurement of houses, rehab of houses, screening of tenants, management of payments & books, evictions, property taxes, managing contractors, and the list goes on. Versus getting a quarterly dividend payment.

If you don't love real estate, you should really pick a different field within which to invest funds. I love real estate, so I own a rental property business.

Thomas S. · Answer

@Audrey Ezeh

Catch 22. I am forced to concede money comes first but by the same token there will always be incompetent landlords and licencing will never happen.

Audrey Ezeh · Answer

Indeed!

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