Why I Like Being a Landlord

[totoro]

We have eight rental units. 

We've had a couple of bad eggs, but most of our tenants are absolutely great. 

Just got delivered a pumpkin pie and tin of tea by our tenants who thanked us so much for letting them stay in our place.  These are tenants who pay early every single month. 

So don't let all the horror stories scare you - do due diligence, have really nice places, don't overcharge and you have the chance to make this way of making money a good experience for everyone.

[arebelspy]

Big +1. A great feeling when tenants thank you for what you provide, and mention how you're the best landlord they've ever had.

Apparently there are some bad ones out there giving the rest of us a bad name, but if you're a good landlord, you'll make more money and help people. Win-win.

Thanks for sharing!

[SwordGuy]

Big +1. A great feeling when tenants thank you for what you provide, and mention how you're the best landlord they've ever had.

Apparently there are some bad ones out there giving the rest of us a bad name, but if you're a good landlord, you'll make more money and help people. Win-win.

Thanks for sharing!

My wife and I hope to be hearing that from new tenants sometime soon.   We're actively working on purchasing our first rental property.  Hopefully we'll get one in place by the end of November.

We live in a military town.  We're planning on offering a "thanks for your service" gift to our active duty military renters every November 11th (Veteran's Day) of a 1/2 month's rent.     

If we end up with single (civilian) parents as renters, we'll do the same thing in December instead. 

We'll make a bit less and simply don't care.

[Overseas Stache]

It is nice to have great tenants.

My tenants in my former primary residence are amazing for a couple of reasons.
1- They adopted our dog and take amazing care of her. (we moved out of the country so the dog had to find a good home)
2- They do all the yard work and even improve the landscaping with more flowers.
3- Take amazing care of the house and it looks even better than when we lived there.
4- They bought Christmas gifts for my wife, myself and my mom and dad. (My dad is working as my property manager that is how they know him, and my mom is very talkative and likes to get in others peoples business)

They are a middle aged couple and there kids are grown so I really don't worry about anything being broken and they will let me know if something needs to be fixed.

Now, all that being said how much is it worth to keep renters like that? I they are half way through their second one year lease for 1250/month. PITI = 860/month. However I know they can't really afford for me to raise the rent when their lease is up. But have been researching the rent on comparable houses in the area and they are renting for 1500 to 1600. It is a SFH in a nice area and I would think it would rent quickly at 1500 month.

What do you guys think should I just keep the renters I have or risk it on new renters to make 250 more a month?

[totoro]

While the discount is a fairly high proportion of the rent, we would keep tenants like this without raising the rent. 

One month's vacancy or failure to pay rent will wipe out five month's of the discount. 

In addition, where we live rent increases are legislated and limited to a certain percent of the rent per year.  This year it is 2.2%.  I'm surprised you don't have this rule where you live? 

That would be a raise of $27.50 per month which might be easier to manage, but would not be worth it to me given their work on the yard alone.

[Overseas Stache]

In addition, where we live rent increases are legislated and limited to a certain percent of the rent per year.  This year it is 2.2%.  I'm surprised you don't have this rule where you live? 

You might be surprised by a lot of the things you can do in Tennessee, like marry your first cousin and stop and pick up road kill to eat. It is legal to set rent at whatever amount you want and it can be raised to any amount after the lease is done with 30 day notice.

[totoro]

Yep, none of those things are legal here...

I don't think it is unreasonable to raise the rent $30 a month.  I do think a $250 or $300 a month increase is likely to cause hardship for many people.

I wouldn't do it because the property is cash flow positive as is and a good relationship with tenants is more important to me than maximizing profits for monetary and non-monetary reasons.  This is particularly so where I knew they might have trouble paying.

A focus on profit is fine, but maximizing rents without placing value on the tenant quality and contribution is probably going to result in higher turn-over.  Turn-over also costs you time. 

[Overseas Stache]

Thanks for the input.

You are right that relationships are important and profit shouldn't be maximized at all costs. Just reading all this MMM gets me amped up to FIRE as soon as possible and it makes me want to maximize all my assets.

[arebelspy]

In addition, where we live rent increases are legislated and limited to a certain percent of the rent per year.  This year it is 2.2%.  I'm surprised you don't have this rule where you live? 

There are some rent controlled areas in the US, but the majority of places are not.

[Bob W]

It is nice to have great tenants.

My tenants in my former primary residence are amazing for a couple of reasons.
1- They adopted our dog and take amazing care of her. (we moved out of the country so the dog had to find a good home)
2- They do all the yard work and even improve the landscaping with more flowers.
3- Take amazing care of the house and it looks even better than when we lived there.
4- They bought Christmas gifts for my wife, myself and my mom and dad. (My dad is working as my property manager that is how they know him, and my mom is very talkative and likes to get in others peoples business)

They are a middle aged couple and there kids are grown so I really don't worry about anything being broken and they will let me know if something needs to be fixed.

Now, all that being said how much is it worth to keep renters like that? I they are half way through their second one year lease for 1250/month. PITI = 860/month. However I know they can't really afford for me to raise the rent when their lease is up. But have been researching the rent on comparable houses in the area and they are renting for 1500 to 1600. It is a SFH in a nice area and I would think it would rent quickly at 1500 month.

What do you guys think should I just keep the renters I have or risk it on new renters to make 250 more a month?

Not even gonna raise the rent on these guys.  Raise the rent when you want someone to move.  Of course if your expenses went up (taxes, insurance, etc)  you might pass along the costs.   If it is a cash flow positive property of course.

An alternative would be to sell the place. 

[sequoia]

We have a tenant who has live at one of our properties in the past 4 yrs. They are paying a little less than market, but I am fine with that. I know the owner of the property next door, which is rented for more $, but they have high turnover. Their previous tenant moved out after 6 months. Thats would just be a headache for me. I work full time, so this is a part time gig for us. I rather make a little less $ but also spend less time dealing with my rentals.

[clarkfan1979]

Great story. I agree with your message. I had many bad experiences as a tenant when I was younger. Now I go out of my way to make sure that it doesn't happen to other people. My tenants get really confused when I got out of my way to make them happy. I have yet to get a pie, but my tenants take really good care of the rental as a thank you.

[zinethstache]

My husband does the maintenance for our rentals, but we use a PM for managing the tenants. We had a sewer backup in a duplex, the tenant called the PM, hubby gave approval for them to call roto rooter, roto rooter said that a plumber was needed as their scope saw nothing. Foolishly my husband approved the work assuming the plumber knew what he was doing. The tenant got home from work and the plumber had dug the wrong direction IN their basement family room, it was a dead end and the plumber was stumped. The tenant happened to have my husbands number in his cell phone so he called and begged for help. My husband ended up saving us 1k and he worked with the plumber to find the sewer line, but then did all the repair and finish work himself. We were charged for the scope and for the plumber's time (destroying our place - but really its an 80 year old place so who knows where the sewer line is). Then the next day my husband buttoned it all up nice and tidy and patched their mess in the family room. The plumber was in the process of renting a backhoe to trench out the entire sewer line. Yikes! Cost for materials in the end $150. Hubby did come home with poopy carharts and boots which he cleaned outsite:) He's a trooper about that sort of thing.

The tenants made him cookies and said he was the best landlord they ever had! They teased him a bit and asked him how he liked being a landlord and my husband said its not bad, its all about crisis management.

[escolegrove]

We are all about FIRE through rentals. We have 5 rentals. While we have great tenants we keep the houses at market or close. Otherwise you are impeding you ability to take care of your profit margins and investment. Even though we charge market we have a great relationship with our tenants. We work really hard to have a great products and take care of issues quickly.

[yddeyma]

Hey Totoro,

What do you look for in a tenant?  How did you find these good ones?

[tracylayton]

One of my tenants brought me 2 dozen tamales and a jar of hot sauce, when she delivered her rent check last month. I have 4 rental homes, and everyone has renewed their lease at least once...some 2 or 3 times. The single biggest predictor for picking a great tenant is a credit report.

[totoro]

That is a good question.  One of the very good things about having nice places in popular areas that are slightly below market is you get lots of applicants and they seem to bring fewer troubles with them.  Location/quality of unit is probably the biggest factor.

Time of year plays into it too - fewer tenants are looking in December.  We prefer to rent on a lease that ends in June for this reason.

I have an application form and check references, but the best thing to do is to make sure you are the one to show the place.  I find that tenants who take off their shoes at the door (more common in Canada than the US) and are very polite and appear "diligent" from the get go tend to work out well.  Diligent means that they fill in paperwork and respond to correspondence promptly, review things before they sign and ask questions, and are polite and friendly in general.

Our best tenants don't come from one particular group - likely because we have different types of properties.  We have a family in our house that has been there for three years now.  We liked them right away.  The grad students in our duplex (also three years) were very nice from the beginning and have continued on that way.  We have a family from China in our other place that are wonderful (on their third year now) - they don't speak English that well but they take care of everything as if it was their own.

Our worst tenants have been the ones I did not meet in person and who were rented to later in the year.  My mom showed the place.  Their references checked out, but they didn't.  I like to think I would have noticed something a bit off, but maybe not.