Saturday, August 15, 2009

Landlords are rich: fact or fiction?

My husband and I own rental property. Each time one of our flats comes up for rent, we show the unit to a horde of people and never cease to be amazed at their expectations and criticisms.

We aren’t slum lords…we have three units on a spacious property with a shared pool. There is parking behind a security gate. We pay the electricity, water, and trash for all three units. When we bought the property we spent 10% of our original 800K+ purchase price upgrading and renovating the property, including new carpeting and paint.

We have a mortgage on the property and, because in this country there is no such thing as a fixed rate mortgage, each time the prime rate goes up, so does our payment. The electricity rates were just increased by 34% and our mortgage payment went up five times in the last 12 months. We raise rents only when a lease is being renewed and our lease allows us to raise it up to 10%. Despite the increases in our mortgage repayments and the increase in the cost of electricity, when our last tenant signed his lease renewal, we raised his rent only 2.5%: our economy is shrinking, he’s a good tenant, and we don’t want to lose him.

Why would we do that? Well, an empty flat generates no income and we depend on the income from the rents to pay the mortgage. The two larger flats must be generating income in order to keep us from digging into our own pockets to make the payments. Good tenants are harder to find than bad tenants…and bad tenants cost us a lot of money in repairs, lost rent while a flat is being repaired, and even legal fees. We are motivated to keep a good tenant who pays his rent on time and keeps his flat and garden in good order, so we made his rent increase minimal so he doesn’t feel like he can’t afford to stay on.

Do people honestly believe that, because we own a rental property, we are rolling in money? And even if we were, why should our affluence mean a renter can destroy the flat or demand the outrageous? Surely the guy who owns the local luxury car dealership has a few coins to rub together…does that mean he should lower the prices on his cars for you or me? So why do people seem to think that because the landlord drives a Mercedes, he has plenty of money and it’s ok to trash the place because, after all, he can afford to fix it?

We had to evict a tenant last week for harassing and intimidating the tenant of another flat. He had been in the unit for four months and when we took possession on Tuesday, I reeled from the shock of the condition of the place. What part of “no smoking in the flat” did he not understand? The flat reeked of stale cigarette smoke…and rotting garbage. Yup, the kitchen floor was littered with trash and a black bag emitted the unmistakeable stench of decay. We had the handyman in to do an assessment and the quote we received covered a full month’s rental…seems they somehow managed to put four cracks in the toilet and replacing that will eat up half the deposit alone. In fact, the damages came to 25% more than the deposit will cover…and he was only in there four months!

A previous tenant was upset with us because we would not dance to her tune…how dare we not build her a garage for her BMW (at a cost equal to a full year’s rent)? How dare we expect her to pay her rent on time? How dare we expect her to refrain from smoking, to water the garden, and abide by other terms of her lease? She quit paying her rent, using the money instead to pay for her new rental and lied to us saying her clients hadn’t paid her. When she moved out, she left the flat in shambles, having caused damage more than double the amount of her deposit. Five months of litigation later, she finally paid up (when the Sheriff came a-knocking with papers to seize that BMW and sell it at auction to satisfy her debt), but in that five month period we had to liquidate some investments to come up with the cash to do the repairs and pay the lawyers. Yes, we recovered the legal fees and were reimbursed for the repairs, but our investments…and their returns…were forever diminished.

I am far from an elitist…I’ve been damned poor in my life, which is what motivates me to be as kind to my tenants as business considerations will allow. Good tenants get treated with special care…we want to keep them and it is worth it to us be flexible in dealing with them in order to keep them. But there are people whose expectations are just ridiculous:

One prospective tenant gave us a hard luck story hoping to get us to reduce the rent for her. “Would you consider reducing the rent?” she asked, naming a figure fully 25% below the asking price. “Sure,” my husband said. “Just as soon as the bank reduces my mortgage by that much.” Unspoken by either my husband or me was the concern that, if things in her life were as tough as all that, is she a good risk with regard to us receiving our rent each month?

Another asked that, if she rented both the two bedroom unit and the little studio cottage on the grounds, would we give her a discount on the rents? Her proposed discount would give her the cottage for nearly free…and remember, we pay the full utilities on all the units! She seemed quite unhappy that we wouldn’t go for her plan.

There were the people who said they would consider renting the big flat but only if we would put security fencing around the pool. Sorry, the flat has a fence all the way around it and if you cannot mind your child and keep him inside an already fenced yard, what makes you think a security fence…and my cost, no less…will keep him out of the pool?

Mostly, however, we get people who want something for nothing. They think the rent is too high without bothering to calculate in the amount of money they would have to pay for electricity. They think that they don’t need to take care of the unit or the garden because we have the money to pay for fixing it after they leave. Even if we do have that kind of money, why does it make it OK to damage the property? And what about those screams of indignation when they hear their deposit is being nicked for pay for it?

If you are one of those people who thinks your landlord is a bottomless pit of money, give some thought to the idea that, if you are late with your rent, he might be late paying the mortgage payment on the property that you live in…and enough of those could see his mortgage foreclosed! Is your landlord slow to fix something? Well, he could be the lazy sod you think he is…and then again, maybe he has to wait for payday to be able to buy the materials to fix the thing that you broke.

But he drives a Mercedes, you wail…his wife wears fine jewellery…they live in an expensive neighbourhood! So what? What does that have to do with your obligation to pay your rent on time, abide by your rental agreement, and maintain your unit? Landlording is a business, it is not a social connection or a charity. If you don’t uphold your end of the bargain, you can make it difficult…even impossible…for your landlord to hold up his.

To expect a person to spend hundreds of thousands of dollars on a property and then allow you to live there for next to nothing is simply not reasonable. Your landlord most likely has a mortgage on the property you live in and he needs your rent in order to pay it. If you think your landlord is a rich, greedy old SOB who can afford to wait for your rent until you feel like paying it, or who can afford to fix the things you so carelessly damage, you’re probably wrong. He has a budget and cashflow considerations, just like you do, and depends on your rent money to make sure the mortgage on your home is paid each month.


  1. I agree, its tough being a landlord, been there, done that. You can get real awful tenants and most of the rent goes to mortgage, unless the interest rates are high and then you still have to top it up.

    People like to pigeonhole others into nice places where they don't belong, but its easier to make sense of the world I guess.

  2. Wow, I really feel for you. I'm renting out my mother's place. However, I'm using a rental management company. My problem involved the cost of moving every thing out and storing it, including 3 vehicles. Probably about $5000.00. I don't dare do the math. Well, lets just learn from out mistakes and become wise and happy landlords eventually...
    Take care,

  3. I've been living in the same rental apartment for over 4 years. I love my landlord and her assistant. They are very kind and solve any problems promptly. I worry every time I have to contact them because something is broken or if I spill something on the carpet, jajaja. I don't think I could be a landlord, too much stress. Good post SV ;-)

  4. I can't believe some of those outlandish requests and demands. Before we got married, my husband and I toyed with the idea of buying a double unit and renting the other. We've realized we don't want to deal with all of that stress.

    I was never a landlord, but I sold advertising space at magazines. Some customer and potential customer demands and expectations were way out of whack as well. They wanted free ads, free space upgrades - things we offered to long term 'serious' clients - not to clients who just wanted to do one 2 inch ad. And of course, they always wanted an article written about them. I'd have to tell them that I'm in sales, not editorial - which was very much 'church and state' at the publication in order to maintain integrity. I'd tell them that the way to get someone to consider writing an article about them, they need to send an official press release to the editor and follow-up as everyone else does. I'd also tell them that the certain way an article would guaranteed not to be written is when a sales person asks an editor to write one. I'm sure you can imagine some of the indignant speeches I got from some who tried to take advantage of me.

    Be strong. And - it's great that you're good to your 'good' tenants. In my experience my 'good' clients didn't mind paying the increases, but they were the ones that deserved the discounts the most.

  5. A clean, safe, quality environment was always a privilege to me when I was a renter, and I assure you I did or paid for all the minor repairs to my apartments - just as I would to my own home. So far as I was concerned, that apartment was my home. My last landlord in Santa Clara (expensive) California never raised my rent in five years, and I replaced a cracked toilet tank, repaired a carpet that was coming unseamed, replaced the blinds in the bedroom, had a friend figure out and fix a telephone jack, and finished painting their less than stellar paint job throughout the apartment. Not a one of those things cost as much as a potential one-month's raise in rent. I loved my landlord and when I moved out I am sure
    he recognized I was a "good" tenant. I was late with my rent once and I got a very polite inquiring phone call. I had been in an accident and couldn't get to a mail box for several weeks.

    My experience with tenants was mixed when I was
    an apartment manager. My favorite tenants were singers and dancers of the local theater company. I really miss those fun, creative, hard working young people. I would be a landlord again in the right environment - but I am pretty tough and am known to give a 3-day notice if things get dicey.

    I now own/live in a house in a really miserable town and feel imprisoned here because I know how bad the tenants are in this drug haven, and renting it out is not an option no matter how much I dislike the environment. I may live long enough to be able to sell and move - and then again, I may not. It's a pretty nasty situation.

    I feel for you SV. I sure wish I knew how to change attitudes - your blog just may wake someone up - let us hope.

    N in Modesto (yuck) California

  6. You make good points and many tenants request too much. However, this is a negotiation business. Just as you have the right to deny a request, a prospective tenant has the right to make the request. Neither party should be offended by the response. After all it is a business for both parties. The last time I rented an apartment I had three units I was interested in. The one I was most interested in was listed as $200 (roughly 15%) per month than the next two. This landlord also wanted me to sign a lease right away and was very interested in me as a tenant(I have good credit, a well paying job, good references). He called me daily between visits encouraging me to sign. I went to this owner with the ad and pictures of the other apartment and told him I would love to rent the unit as long as the rent was reduced. Of course I knew that he may or may not accept my offer and I was fine with that. He was very upset and made some rather personal remarks against me. Of course I ended up renting the other unit and couldn't be happier. I would advise landlords to remember that tenants shop around (especially good ones). Don't take it personally if they request something that isn't reasonable just politely tell them no. All the best!

  7. I emphatically disagree. You are right that this is a business but you seem to miss the point that this is MY business, not the tenant's. And, like any business, the landlord has to make enough money to pay the expenses before a profit is made...and business is all about making a profit.

    It is NOT a negotiation...notice that you did not get a negotiated rent, you paid the asking price of another landlord. What you did, however, was to suggest that the one landlord was overcharging which is insulting, especially when you have no idea what his costs might be. I would have suggested that you take one of the other apartments...and I would NOT have encouraged you to pursue my rental unit.

    I don't like tenants who think they have the right to dictate what I charge for rents...they have turned out to be people who think the restrictions in the lease are suggestions and end up costing me a bloody fortune in repairs and renovations when they move out.

  8. previous poster here- I completely agree with you that a landlord has to make a profit- and tenants often don't understand what expenses the landlord has.

    One lesson I learned in business a long time ago 'don't take anything in business personal'. It appears your frustrations may be stemming from taking things personally.

    I could care less that I didn't get a negotiated rent. Landlord A pursued my tenancy more than I wanted his apartment. I had other options that were just as reasonable. I told him what it would take for me to sign a lease with him and and obviously the number didn't work for his situation. If he was insulted so be it. As any good landlord should do, he should have been pursuing multiple tenants (I have no idea if he was). I ended up with an apartment at a price I was happy with.

    I am not suggesting that any landlord should accept an offer (or even consider one) from a tenant that wouldn't be profitable. Just remember that good tenants do shop around for apartments. If one makes you an offer you can't accept tell them that clearly and don't take it personally.

    All the Best!

    All the Best!

  9. You are, of course, entitled to your own opinions on this matter. But from the standpoint of a landlord, business operator, and human being, I see you have made several serious errors in judgment.

    1) What were you thinking, looking at flats you could not afford or were unwilling to pay the rent for? Do you realize that you wasted that landlord’s time? He may have had plans he had to change…or even cancel…in order to deal with you. I don’t mind showing my units to people who are honestly interested in them…but I am genuinely annoyed by people who waste my time. If my unit is in the wrong part of town, if it costs more than you are willing to pay, if you want me to furnish it for you…you are wasting my time because all that was covered in the ad you answered.

    2) You mistake indignance at being implicitly called a gouger for “taking it personally.” You show a “blame the victim” mentality by clearly implying that you can say whatever you want and if the other person takes umbrage at your insult, it is their choice and therefore not your fault. You have simply created a rationalization for yourself that allows you to say whatever rude thing that pops into your mind or take any action you desire without your conscience kicking in.

    3) Your anecdote shows a complete lack of respect for that landlord and his professional acumen. Even if the other units you were viewing were right next door to his, you have no idea what kind of obligations this person has on his plate. The unit that is $200 cheaper may be in a complex the owner bought 15 years ago and so his mortgage is much lower…or there may be defects that you won’t know about until after you move in…or the more expensive place comes with a landlord who responds immediately to your calls for repairs or service while the cheaper landlord only makes repairs when the units are about to be shown and fully expects you to share your abode with roaches big enough to saddle and ride.

    4) It is business, not a game for your amusement: it is not your place to “make an offer.” If you don’t like the rent being asked, don’t waste my time with games, don’t even call. Any tenant who makes me an offer on the rent is automatically rejected. I do not want to deal with people who think that clearly stated rules (i.e., the lease) are just a starting point for negotiation. My property…my way or the highway.

    I used to be a lot more flexible than this, but tenants quickly taught me that malleable landlords were suckers. The landlord you tacitly insulted and whose time you wasted, made a serious error in judgment by chasing a tenant down. Just as tenants shop around, so do landlords. He would have saved himself a lot of aggravation…and ended up in the same place, ultimately…if he had just waited for a tenant less interested in gaming and more interested in finding a good place to live at a price he was actually willing to pay.

    This discussion is now closed. If you respond further in this vein, I will not publish your comments. I am choosing to end the game and turn my time…which you are wasting…to pursuits of my own choosing.

  10. meebeeitsu@yahoo.com06 December, 2009 09:34

    I am at wit's end regarding my landlord. I tend the garden and pick up trash littered in the lobby and outside because I do not want to live in a slum place. I live in a Victorian house that has been divided into 6 apts. I live in the front, breathing in carbon monoxide all day (unemployed since June) hearing drunken University of San Jose students nightly and my apartment has no amenities but a sink, toilet and shower. The cabinetry is high school finals at best, wood shavings due to the only kitchen drawer not being on a track fall into my pots and pans below. Wind blows through the gaps in the windows and electricity outlets are limited.
    Yet he is raising the rent to $900 dollars starting in January. I liked what I read about your views on income, but this guy is a money maker, manager of engineering at GE Nuclear, renting out a house in another part of town, and not hurting for money at all. What is fair?

  11. I couldnt agree with your article more. As a landlord to a few buildings with both residential and retail tenants I have had to maintain a flexible attitude in this economy- especially with late rent from the business that are tenants. The great majority of my residents are good about things and the ones that arent usually leave on their own. I do not think that flexibility means being a sucker- I would rather have late rent than an empty storefront.

    Thanks again- you voiced what has been in my head for a long time.

  12. I agree with your comments. Too many people think that landlords have $$$$ falling out of their bottoms, they don't and even if they did, so what? It's non of the tenants' business. If they don't like the look of the place or consider the rent too high then they don't have to sign a lease, no one is forcing them!

  13. Well, I've been on all sides of this. It's a terrible feeling not to like where you live. I'm especially lucky that I've always had reasonable landlords even if the properties themselves weren't luxurious by any means. I'm also grateful that I've been able to find Landlords that take bad credit renters. Due to serious health complications in my early 20's I had terrible credit rating for over 7 years. Thankfully my income is very nice and I was always able to work out a deal where I paid 6 months of rent up front to prove I was a good tenant. Now that I'm older and expecting inheritance money of large sums, I think more and more about how I would like to invest money. I took several real estate courses for my own knowledge and I'm very happy that I will become a landlord. I have plans to start with a fourplex and to keep adding from there. My landlords have even been kind enough to give me their knowledge as well. Some tricks and money saving tips. I have always enjoyed my landlords for the information they so willingly give me, for free! Apartment management is difficult enough, but I'm really excited to try my hand at it and the authors information here really does a nice job of explaining some ins and outs. Very good article.


Your comments welcome! Anonymous comments are enabled as a courtesy for people who are not members of Blogger. They are not enabled to allow people to leave gratuitously rude comments, and such comments will not be published. Disagreement will not sink your comment, but disagreeable disagreement will.