The “Average” Landlord

Eds Note: In any city people living in rental units of one kind or another make up a sizeable proportion of the population. The owners and managers of those units make up another smaller chunk of the city population. But how they work together is vitally important to the health of the city. And, as Dr. Rent points out, many landlords don’t know what they have gotten themselves into…

John H. FischerBy Dr. Rent 

I received a newsgroup article the other day that reminded me that often people don’t know much about landlords. They assume that we don’t work for our money, that money is an un-earned benefit of owning real estate. They assume we take that rent check, pocket it, and spend a lot of time where it is warm and sunny.

I am a full-time landlord. With nearly 200 rental units, I am one of the biggest in the Wausau area. I am NOT the average landlord.

The average landlord in the Wausau area has 16 units or less (one or two 8-plex apartment buildings). Many landlords only own 1 or 2 single family homes, or maybe a duplex or two.

The average landlord invested in real estate as part of a long term retirement plan. They have normal, full time jobs just like everyone else. In part of saving for retirement, they bought some kind of small rental property. Most have no experience or training and at first saw it only as an investment much like stocks or 401(k)’s. The intent: Purchase and have the rents cover the expenses and the mortgage, do work (as needed) in their time off. Understand that they may have negative cash flow for a while (meaning the rents do NOT cover all expenses). However, in 25-30 years, the real estate would be paid off. Then, their retirement income would be the rents less operating expenses. At some point in time, sell the property to turn the nest egg into liquid cash assets.

The landlords you see that do spend a month in Arizona or Mexico are normally the ones who have held the property 30 years and this is their retirement, they are doing things most retirees want to do. However, between 1/3 and 1/2 of that rent they receive still goes to pay operating expenses; they do not get to keep the entire check.

Many new landlords did not realize what they were getting into. They watched the infomercials, they watched the new shows on how to rehab and make money in real estate, and jumped right in…. the next big thing to get rich quick. They did not learn about the importance of tenant underwriting or following local, state and national laws. They are not ignorant, they are not dumb, they are only naïve. The result, too many times, is what was going to be the way to being the next Donald Trump turns into a foreclosure in less than 3 years. Real Estate is not how you get rich quick. Real Estate is how you build wealth over time – not years but DECADES!

Like I said, I am NOT the average landlord. I worked for a large landlord who started out the slow way back in the late 60’s and was able to weather some really bad times. I worked in the industry 13 years absorbing any piece of information I could before I became the one holding the deeds. My mission now: to help those who don’t do this full time, who can’t possibly do the research I have done, to help them realize all of the potential their investment can be while understanding the responsibilities that come with it.

Give your landlord a break, they are normal working people. Sometimes, when they don’t fix something right away, it’s not because they are hording all the cash, it may be possible they just don’t have the money. You may need them to wait a few weeks for the rent, but the bank holding their mortgage is normally not very patient.

This is not an easy investment, and is not for everyone.

Dr. Rent.

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3 responses to “The “Average” Landlord

  1. At first, I was going to say, “there oughta be a law” but I will say this instead. People sometimes say that people should be trained or certified before they are “allowed” to be parents, and perhaps the same should be true of landlording.

    Perhaps, John, this is something your association can do. How about some kind of certification program, a “seal of approval” for landlords. The association could set up criteria (lease terms, financial reserve requirements, dispute resolution procedures, etc.) and when a landlord meets these, they get some kind of certification. Tenants looking for a place can then see who is “certified” and hopefully those places would have an advantage.

    I would think that the city or county (nudge, nudge, wink, wink) would have a stake in the sucess of such a program and perhaps find some way to get involved as an “honest broker” to give additional weight to the “certification” that could be developed.

    Just a thought.

  2. One thing we want to AVOID AT ALL COST is government intervention. Most of what a landlord needs to know is common sense, and setting up mandatory education and/or licensing actually would make rentals more expensive. (We do have an affordable housing crisis… hmm sounds like a post topic)

    We mostly learn from experience, the smart ones learn from others’ experience.

    There are certification programs at the National Apartment Association, and even at the State level with the WAA.

    Mandatory Eduction is just not financially feasible. It would not surprise me if the number of landlords for the City of Wausau alone was well into the thousands. And, with the average landlord maybe having 1 or 2 single family homes, spending hundreds of dollars on education, that is hundreds less that they would then have to put back into the property.

    This is a zero sum game. You only have the money coming in from rents. With that you have to pay the mortgage, property taxes, repairs, etc. The more expensive un-needed government regulations are, the less money is available for upkeep unless rents increase.

    99% of landlords want to do the right thing, and do the right thing. The problems without having the education is that when things go bad and it is time to evict and/or go to court… the novice sees court as a no-win situation. Properly armed, a landlord should see it as no-lose.

    The Wausau Police Dept has done classes (voluntary and free) about how to keep drugs and criminal activity out of rentals, these are normally very well attended. I think if the Fire Dept offered free (voluntary) classes on how to comply with rental housing fire codes, they would also be well attended.

    The good landlords will do the right thing whether the city requires it or not. That other 1%, the bad ones that give us all a bad name… they will NOT do the right thing, even if required. There is no need to regulate when the problems rest with 1% that will not change regardless of what the law says.

  3. The following was a letter to the editor of a Binghamton, NY newspaper. I don’t know the article it was addressing, but it looks like a landlord was criticized for a holiday-season eviction. This short letter explains very well the point that I was trying to make.

    Don’t judge landlord

    Not all landlords are wealthy. My mother is a landlord of two small apartments and lives on her rental income and a small Social Security check. When people don’t pay rent, she can’t pay the heat, her utilities, pay for food, etc.

    I don’t know anything about the landlord or the tenants evicted on Dec. 24, but apparently the judge had information that allowed him/her to approve the eviction. Perhaps the tenants had repeated months of not paying rent. Yes it’s sad it happened at holiday time, but it is the responsibility of the tenant to apply for community or social services for assistance.

    The landlord may just be an average person trying to make ends meet and didn’t have the finances to support these tenants. We don’t know the entire situation, and to think negatively of the landlord based on half of the information is irresponsible and unfair.

    Tina DuBois

    Binghamton

    I learned of this article through
    http://www.OwnerRights.com

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