Rental Business Values

When we first started investing in rental properties, many of my friends would jokingly refer to us as “slumlords”. Although I knew they meant the term in complete jest, it still stung a little bit. “Rent collector” has had a generally negative connotation since biblical times and with good reason. Most of us have experienced greedy landlords who could care less about the tenant and were obviously only focused on making a buck. Whether investing in one duplex or a 100-unit apartment complex, it is important to establish values for a rental property business.

It always irks me a bit when hearing real estate investors’ gloss over the human element of the investment. Most of us have paid rent at one point in our lives but many investors seem to forget what it was like. The very act of paying what may seem like an exorbitant rate for shelter is not the most pleasant experience for a tenant. Tenants will know at first glance if a property owner is looking to make a buck or is really committed to making renting as tolerable as possible. There are a few core values and operating principles we follow that I’d like to share for any investor considering taking the plunge into the rental business.  Much like this week’s featured pic, a sign from a factory in 1913, we generally follow the Golden Rule.

We are service providers. Our business is to provide clean, well maintained and safe homes for our tenants. My wife does most of the customer facing interaction and I handle most of the repairs. I usually don’t share with tenants that I am the owner until it comes up in conversation, sometimes while I am under their sink or wedged behind the toilet. You can visibly see the appreciation that the owners rapidly and personally respond to their maintenance request. 

Rent a little below market. When offering properties slightly below market rent, vacancies usually become a non-issue as most tenants are looking for the best value. More importantly, especially in today’s crazy rental market, tenants will recognize we are not landlords’ intent on gouging rent. Tenants recognize greed and will respond accordingly. It is a real pleasure when we are thanked for not gouging rent. 

Modest rent increases. By modest I mean in the $50 range. A $20 or $30 per month increase may seem small, but is a big jump for someone who is struggling to meet their monthly financial commitments. While sometimes it may be necessary to increase rent in subsequent years, we try our best not to. In our humble opinion, gouging rent is taking a short-term gain but ultimately a long-term loss.

People first. Renting property is a people business and people must come first. Not only is discriminating against tenants based on sex, religion or race just plain wrong, it is illegal. We assess tenant applications based on the results from our screening service. Purely quantitative. While we assess prospective tenants via numbers, we never forget people first.

Clean and modern. When I rented, it was always the little features in a home that jumped out at me. Good solid blinds that actually block the light, a ceiling fan for that room upstairs that is hard to cool, a refrigerator with an ice maker and fixtures that don’t look like they are from the 1970s. Good 2” blinds are only a few dollars more and modern appliances maybe more expensive but the tenant will appreciate them so much. These investments are important and I daresay payoff in the long run. Similarly, when prospective tenants view one of our properties, the residence will be as close to spotless clean as possible. Tenants appreciate clean properties and we want to send a message about our expectations on how they should maintain the residence!

These are just a few of our guiding principles. Establishing values and good business principles must be considered before diving into rental property investing. Some of the practices I mentioned above may cut into an investor’s bottom line in the near term but I’d venture it won’t break the bank and will ultimately pay off in the long run. Furthermore, the personal satisfaction from being perceived as fair and honest is worth so much more than a couple hundred extra bucks every month.

Interested in rental property investing? Look for “Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing” on Amazon to learn how our family turned rental property investing into a successful side hustle!

Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!

The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

Use the links in the about section below to follow on social media or subscribe for emails to receive updates on the latest weekly blog at www.normspivey.com!