The stereotypical view
The “angry tenant” is such a classic stereotype in our culture, but the image exists, and dealing with a difficult tenant is always dreaded by property investors. Certainly the best investment property advice simply states that you must be wary of installing any potentially disastrous tenant in one of your units. An angry tenant can quite literally rob you through non-payment of rent, and take any positive cash flow investment down into an abyss of red ink in very short order.
“One Bourbon, One Scotch, One Beer”
In our culture, for me, the quintessential angry tenant is represented in George Thorogood’s 1977 recorded version of a classic blues song written by Rudy Toombs and covered by John Lee Hooker, “One Bourbon, One Scotch, One Beer.” In it, Thorogood created a mash-up of the original song by combining it with another Hooker recording, “House Rent Boogie,” which serves as a background storyline to explain the singer’s predicament.
“House Rent Boogie” describes the events that occur after the singer has lost his job. Unable to pay his rent, he tries to gain temporary lodging with a friend, but is unsuccessful. He then lies to his landlady that he has gotten a new job, and is then able to return to his apartment, but proceeds to remove all his possessions. He then goes to a bar and orders the three drinks to help him drown his sorrows. All the while stiffing his landlord:
“So I go back home I tell the landlady I got a job, I’m gonna pay the rent She said yeah? I said oh yeah And then she was so nice Loh’ she was lovy-dovy So I go in my room, Pack up my things and I go I slip on out the back door And down the streets I go She a-howlin’ about the front rent, She’ll be lucky to get any back rent She ain’t gonna get none of it”*
The cost factor
There can be quite a few interpretations when you mix a tenant’s anger, stereotypes of uncaring landlords, and blues music all rolled together. But let’s face it – as a property investor, you want to avoid the angry tenant at all costs. Obviously, because it will cost you plenty. Just as the song alludes…
I’ve got to wonder if George Thorogood owns any rental properties these days…you know – setting up that nest egg for himself. And if so, what does he do when encountering an angry tenant? Smash his guitar over the tenant’s head? Now that would make for a slightly ironic visual image…
Hold onto the good ones
One thing is for sure: the best way to avoid a bad tenant is to select a good one. But even more importantly, you’ll want to hold onto the good ones. Without a doubt, the cost to keep a good tenant is a fraction of the cost of dealing with the negative effects and destruction a bad tenant can cause.
We already know that for several years now, the U.S. has been evolving from a nation of homeowners to renters. As numbers rise for total renters, so does the incremental rise in real estate investors who look to buy investment properties. But only the savviest of investors will see positive cash flows on their investments.
A property investor’s misconceptions
Usually property investors who are not getting the returns they planned think they bought poorly. They think that either they didn’t buy a property in the right location, or they bought it for the wrong price. However, the more valid reason for not showing positive cash flows is that the investor did not do their homework properly. They may have underestimated their total expenses, or gross revenues from rent, or both.
But probably the single greatest greater factor in failing to buy investment property with a positive cash flow, is simply poor management of one’s properties. This includes doing a poor job of selecting good tenants.
How to find the best tenants
When you screen for tenants, don’t be afraid to research your prospects in great detail. This includes performing a credit check on them as a start. You’ll also want to speak with their current and previous landlords to get a sense of how reliable your prospective tenant may be. In addition, ask about any problem or complaints the former landlord may have had with them. Another good tip is to actually visit their current home. Look for how they maintain it, since this will be an excellent sign of how they will treat your unit. In addition, try to speak with their employer about their length of time on the job, as well as their prospects for future employment with the same firm.
Make nice with your tenants
Once you’ve chosen your new tenant, be sure to ingratiate yourself with them (thus helping to explode the stereotypical landlord image, noted above). On their first day, meet with them to go over the operation of appliances in the unit, as well as to discuss area amenities they should check out. It’s also a good idea to offer them a small housewarming gift too. Remember, this is a business. And it’s always easiest and least expensive for any business to retain clients than it is to search for new ones.
Collect in person
Finally, when it comes to collecting rent, do it in person. Time consuming? You bet! But you’ll have the chance to meet face to face with your tenants once a month, ask about any problems they’ve encountered with their unit or the area, as well as check on how well the unit is being maintained – all at the same time. And that’s what I call good preventative maintenance.
In addition, when you are acting as your own property manager, you should be acquiring properties that are no more than a half an hour away from your own home. If anything major were to go wrong in an emergency, you’ll be grateful you live close by.
Buy investment properties intelligently
With over three and a half million single-family rentals in this country right now, and growing daily because of increased rental demand and the foreclosure crisis, looking to buy investment properties is an intelligent addition to any investment portfolio. Just remember to crunch your numbers conservatively, and find only the best tenants when screening. Be sure to avoid those stereotypical “angry tenants” at all cost.
“One Bourbon, One Scotch, One Beer,“ copyright 1977 George Thorogood and the Destroyers
photos courtesy of hdwallpapersfix.com,
jackbrummet.blogspot.com, songkick.com, rottentomatoes.com,
allpropertymanagement.com, abreupropertylistings.com, doityourself.com,
neighbors.denverpost.com, moneycrashers.com, activerain.com