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…
By 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.