April 17th 2023
They say that purchasing your principal residence is largely an emotional decision while buying an investment property is a matter of logic. And while there is a certain amount of truth to that, it isn’t the whole story. Or at least it shouldn’t be. One element that should be prevalent in both is the pride of ownership. Let me explain.
When you are shopping for your own home, you probably have a picture in mind. Wrap-around porch with a swinging chaise lounge, swing set in the backyard, and flowers planted in the garden. White picket fence. None of those things are necessary. A roof and a furnace are necessary. But they make a house a home. They are an extension of yourself. They express your pride of ownership.
And as you drive around a neighbourhood it’s not hard to see who exhibits pride of ownership and who does not. Drive by a house with weeds in the garden, with a fence in need of painting. With grass uncut or poorly tended. Drapes hanging limply in the windows, maybe a car on the lawn. The house is still providing the utility it was designed for. A place to eat and sleep. But there is no pride of ownership. It has either been lost or was never there, and it shows.
And the same thing applies to our rental properties. Of course, when we are looking at properties to buy the numbers factor in large. We look at the cap rate. After all, it’s a business and the property needs to carry the mortgage and eventually give us a good return. But that isn’t all we should be looking at. Is it a property we would be proud to own? As our portfolio grows would we ever want to hold a tour and take people around to see our investments? If we aren’t proud of what we own, if it’s just the numbers that matter, why would a discerning tenant want to call it home? And even if you locate a ‘quality’ tenant, why would they bother to keep the property nice if the potential isn’t there and the landlord doesn’t care?
What happens over time, when the landlord goes only by the numbers is that the properties become run down. They still function. Provide warmth and shelter. But they start to look like the house in the neighbourhood we described earlier.
Now I realize what happens in many cases is that the landlord buys with passion as well as by calculation. He buys properties he can be proud of. But some of his tenants don’t care. They allow the property to get run down. And after one or two costly interventions, the landlord stops caring as well. “What’s the use?” he asks himself. “The tenants are just going to let it go anyway?”
And while I can empathize with that, it can’t be the approach we as landlords take, either in our acquisition or as in our approach to maintenance. Right from the start, buy right. Not just by the numbers. Often the best returns are generated by some awful dumps. Buy on the numbers, sure, but not just on the numbers. Buy with lots of pride of ownership. Buy good solid, attractive properties, in as good a neighbourhood as the zoning will allow. And then take your time finding the right tenants. If it’s a single-family home you have for rent, take a drive by the place the tenant is now renting. How is it kept? If it’s a multi-family, budget some funds for yard and garden care once or twice a season. Keep on top of painting and repairs. And on tenants who don’t do their part.
I have a lovely north-end back split that on a drive-by was a mess. The lawn was not cut, and junk was strewn all over the outside. I knocked on the door and got the story. Dad had a new girlfriend and was spending most of his time there. The teenage kids were left on their own in the house. Good grief.
So I had to make it clear. Move in or move out. You can’t continue operating like this. It’ll soon be a disgrace in the neighbourhood and over time it’ll need costly repair from neglect and misuse.
I realize of course that with the tenanted property the chances of your property appearing on the cover of Home and Gardens are slim. Your expectations can’t be unrealistic. But by buying right, selecting tenants right, and staying on top of things, you really can enjoy pride of ownership on your rental inventory, whether they be single-family, multi-family, or commercial.
Wayne Quirk, Author, “THE MONEY MACHINE”, wayneq@remax-gc.com