May 15th 2023
One of the things I am adamant about in my teaching of investment principles is the delegation of repair and maintenance. If you are a plumber, for example, and get a call from a tenant telling you that the tap is dripping, call a plumber, I say, don’t be the plumber. Nothing will drive you out of the residential tenant investment business quicker than the constant calls you get for little things that need attention. You’ll run back and forth, at first priding yourself on your ability to solve the problem and the money you saved in the process. But that great feeling of accomplishment will soon dissipate and before long you’ll resent the phone calls.
No, to last, and that’s what we are aspiring to do, you need to distance yourself as much as possible from the ‘hands-on’ approach and treat this thing as an investment, not an occupation.
The one possible exception to that rule might be for the guy or gal who is retired, handy, and looking for something to do. You may find it fulfilling getting called out on repair jobs, perhaps hands-on cutting the lawn, raking the leaves, pulling the weeds. Counting the bricks. Whatever. If you do, go for it. But carefully monitor the process and if you find you are getting tired of the intrusions and demands, delegate.
And keep in mind, even for the plumber landlord who calls a plumber, those costs are deductible at tax time. Essentially you are paying with before tax, not after tax dollars.
But there is a possible exception to the ‘always delegate’ rule that I want to talk about today. And that is the process of tenant selection. The two most important tasks you as a landlord are ever going to be facing is buying the right property and selecting the right tenant. And while you can rely on professional help for both tasks, ultimately the decision in each case needs to be yours.
I realize there are property management firms available that will assist you in both the repairs and maintenance of your properties as well as showing and renting. I’ve always found that meeting with prospective tenants, showing the units, and selecting who the successful tenant will be is best left in my hands. Kind of like arranged marriages, I suppose. Someone else can handle it, but I have to live with the results. I want input.
That’s not to say you can’t hire a management or rental company to do the scheduling and showings of your units, and you can review the applications that come in and make the final decisions. You can. And I’ve done that on occasion. In fact, there was a time when I would wait till a unit became vacant. Leave it unlocked with application forms on site and encourage prospective tenants to have a look at their leisure and let me know. I don’t do that anymore. Sure, it saves a lot of legwork. A lot of wasted trips where a tenant does not show up for an appointment. But I’ve found that there is something about actually meeting the prospects on-site. How do they strike you? Do you interact well? How do they conduct themselves during the showing? Is there any chemistry there? I’ve found that the better caliber tenant was more likely to take and complete an application after we’ve had a chance to interact. Salesmanship? Perhaps. But it’s also about good feelings. And the tenant wants to be comfortable with the landlord too before he makes a long-term commitment. And the same holds true on the part of the landlord before he ultimately commits.
Of course, meeting the prospective tenant is just the start of the process. You’ve got a lot of due diligence to do. And while much of that can be done by reviewing the applications, and making the calls, the starting point is at the showing, and there’s nobody better equipped to do that than you.