The Death of a Landlord...and What you Should Learn From It

Brandon Turner recently stepped into the shadows to cast a light on a part of the investing world that we don't like to talk about.  In his article "Why are so many Real Estate Investors Going Bankrupt?", Brandon relates an all too common story of the financial ruin that lurks just out of sight ready to leap when you aren't paying attention.  And, way too many of us don't pay close enough attention.  Today, in Louisville, we went beyond the shadows into full-on darkness as a landlord was shot and killed by a tenant during an argument over a $60 utility bill.  Let that sink in.  

As word of the incident ripped through the local investor community, it became hard to focus on anything else.  Thoughts and prayers for the family left behind mixed with a bit of soul-searching and the unavoidable "what ifs?"  What if this or that had happened differently?  What if the argument had happened over the phone? What if... it had been me?  That particular one is both challenging because of the implications and simple because of the way I run my business.  The truth is I would never be in that particular situation and you shouldn't either.    

Here's 3 Policies Every Landlord Should Have in Place  

1) You are the Property Manager not the Owner

The Property Manager works for The Man.  He wants to help, but has to follow the company procedures.  People appreciate the fact the PM tries to intercede on their behalf with the Owner and they understand that some things just don't work out.  The PM has to follow his boss's orders just as they have to listen to their boss's.  

The Owner is a soulless son-of-a-bitch who only cares about making a buck.  Owners make decisions and can be held responsible.  No one wants to see the PM suffer, but they sure as hell love sticking it to the Owner. 

If your cards say "Owner", "President" or any other vanity title, change them.  If you introduce yourself as the such, stop.  Be the PM who represents the Investors (plural).  

2) Payments are made at the Office, not at the Property

There are all kinds of reasons that you should never travel around collecting money; none more obvious than what occurred today. There is a reason (valid or not) your tenant didn't make their payment.  Have that discussion on the phone.  Backing them into a corner on their home turf can be akin to poking a caged animal.  Most will make excuses, beg forgiveness, etc., but every once in a while, one will snap.     

Whether your office is a physical location (other than your personal home) or a PO Box, that is where ALL payments are made.  The only allowable exception is the security deposit and first month's rent.   (Everyone is happy when they first move in).

3) Have a Good Attorney (and use her)

When my tenants don't pay, they get a 7-day letter.  (This is the requirement in Louisville.  It may be different in your area).  Now, I am admittedly a little lax on the actual day the letter goes out, but the rest of the process I follow very strictly.  If payment is not received in our PO Box by the seventh day, the Owner sends the file to our attorney.  At that point, the PM is no longer in the picture.  It's in the hands of the legal system.  In our area, it costs $140 to evict someone.  If you get to this point, there is no better use of $140 than having your attorney handle everything.

What happened this morning was as senseless as it was tragic.  I don't know what causes someone to turn a gun on another person, but if I had to guess, this tenant was going to shoot someone today.  The landlord trying to collect $60 was the final straw.  If it wasn't him, it may have been the mailman or a noisy neighbor.  No one blames the landlord here but, it's hard not to ask, "What if?"