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.

What do you call rich?

The next time somebody calls me rich, I think I am going to fall over and laugh until I need oxygen supplementation to breathe!

I am the first to admit I am comfortably well off, by both American and South African standards. Back in Silicon Valley, a costly place to live by anyone’s standards, and I saw my fair share of Mercedes and BMWs gracing the highways and byways of the Valley. Godiva choccies in every Macy’s, a Macy’s in every mall…Silicon Valley was definitely not a low rent kind of place to live.

Here in South Africa I hadn’t expected a higher standard of living for the average person, so I was downright astounded to see so many Beemers and Benzes crowding the parking lots outside the malls and jamming the roads. Not many Bentleys or Ferraris, I’ll admit, but then I rarely saw those back in California. A maid and a garden service are the middle class norm here, and the stay-at-home-mother is very much in evidence (and she has a maid and often a nanny as well). I have achieved the socioeconomic status I longed for back in my twenties…I don’t have to work, I have a maid, I drive a Mercedes, and I have enough money to pay for everything I need and quite a bit of what I want.

That being said, it is important to note that my needs and wants aren’t that grand. My second hand Mercedes is a joy to me: she’s eight years old and I love her to bits. I don’t want a cook: I just want someone to clean up the kitchen after me when I’m done cooking. I have a platinum credit card and a charge card for my favourite dress shop and when I say “I’m out of cash,” my husband’s only response is “How much do you want?” Life is good.

If that sounds rich to you, then you’ve got a shock coming because this weekend I got a look at the truly, extravagantly, obscenely, gaggingly rich. Hubby and I had brunch at our favourite quayside restaurant yesterday morning and moored across the inlet from us was a yacht. OK, it was a big boat from where we were sitting, but not that big…or so we thought. As we sat their munching our fresh croissants, a Chinese squid seiner lumbered into port, nudged along by a couple of scrappy little tugs. It was a big old rust bucket, and took its sweet time getting moored…right in front of the yacht. It was then that I noticed the yacht seemed pretty close to the Chinese ship in size…and while it was no super tanker, the squid ship wasn’t exactly your little eight man fishing boat, either!

After brunch we took a walk over to its mooring point and just gawked. It was tied alongside the pier so we were able to walk the entire length of the port side. It was huge. Inscribed around a porthole were the words “Tatoosh” and “George Town,” and on the stern “Tatoosh” and “Cayman Islands.”

“Maybe Bill Gates is in town?” Hubby opined, staring unabashed at the gleaming while-hulled monstrosity.

“Nah,” I shook my head. “He lives in Seattle…that’s an awfully long way to sail a boat, even one this big!”

We continued walking and gawking. In the course of our stroll we discovered a ketch stowed on the port side, two (two!) helicopters on separate helipads, and two motor launches. When we got back home I got on the internet and discovered that Hubby was more right than I was. The yacht belongs to Paul G. Allen, one of the founders of Microsoft. And it was a whole lot more boat that I had bargained for.

First of all, it is 303 feet (92.4m) long. Do you have any idea how long that is? A regulation American football field is 360 feet long! The thing is 49 feet (14.9m) wide and it cost $100million in 2001.

In addition to the amenities we could see from the dock, we discovered that the boat has:
Five decks
A spa
A master suite, a saloon and other rooms on the top deck;
A saloon with a French limestone fireplace, a dining area, staterooms and a ladies' powder room on the main deck
A lobster tank
A shaded six-foot (1.8m) deep swimming pool, located aft on the main deck beneath a full overhang
A movie theater
A big crane to transport two helicopters on the top two decks
A custom Hinckley powerboat (about a 40 footer (12m))
A Hinckley sailboat of about 40 feet (12m)

Mother Jones gives a few more details:” The 300-foot Tatoosh carries a 30-person crew, two helicopters, a swimming pool, a spa, a private movie theater, six other surface boats (including a separate 54-foot racing yacht and two Hobie catamarans) and a submarine.”

A submarine, for crying out loud!! A submarine!

But wait! It gets better…or worse, depending on your point of view. This ostentatious monstrosity is only his second best of three yachts! Allen also owns the Octopus which, according to Mother Jones “is 413 feet long, with seven decks, a 60-person crew including several former Navy SEALs, seven other on-board boats, a basketball court, the obligatory movie theater and swimming pool (just one?), and two submarines, one of which can stay two weeks on the ocean floor. Allen also owns a third megayacht it turns out, plus two personal Boeing 757's, in case one is in the shop.”

Before you get up on your “Greedy Americans” high horse, though, you have to know that Tatoosh is only the 26th largest yacht in the world, the largest presently owned by the Sheikh of Dubai. It’s called “Dubai” and is just two inches shy of being 525 feet long (160m). That makes it almost 1 ½ football fields in length. I can see where a sheikh might need a vessel of this size to keep all the wives and children in comfort, but what is Paul Allen’s excuse?

This is conspicuous consumption of the most obscene order. The man has three yachts…how many can you skipper at a time? This man is rich beyond even my imagination (and mine is pretty good!) and what he does with it is buy more yachts? Yah, yah, I know he has a foundation and does good works, but this is ridiculous.

If I had those three yachts I’d decide which one I liked best, then I’d sell the other two and sink the money into something meaningful, like free education for all of South Africa’s children…or free university educations for every American high school senior who could get accepted into college. Or fund some hospitals in places where the medical care is scarce…or establish a safety net for those millions of my fellow Americans who work but have no health coverage…the ones too rich for government assisted health care, but too poor to buy their own.

I am sure the sale of a couple of $100million yachts could fund all kinds of good works…I’ll bet old Paul could peel off a couple of hundred million more without even putting the tiniest of dents in his lifestyle (he’s worth $42Billion, after all). It boggles me to think of all of the good this man could do with all that money without reducing the quality of his life one jot.

It’s obscene, I tell you, the conspicuous flaunting of that kind of wealth. And the next time somebody dares to call my middle-class self wealthy, “Tatoosh” is the first word that will roll off my lips!

http://en.wikipedia.org/wiki/Tatoosh_(yacht)
http://www.motherjones.com/commentary/columns/2005/09/paul_allens_other_yacht.html
http://en.wikipedia.org/wiki/List_of_motor_yachts_by_length