Don has the most unconventional approach to owning and operating rental property I have ever seen. I have watched him operate for many years and he violates almost all the “wisdom” found in books about property management. However, his units stay rented and he collects most of the rent. Unlike many others I know.
I read many years ago that “Good management can be a subtile trap. The new owner may not appreciate the skill of the former manager/owner and find it difficult or impossible to maintain the income.” I have seen this in action with a couple of buildings he sold. The new owners try to run them “by the book” and it doesn’t work. They are busy loosing serious money.
It has been entertaining to watch; I hope you enjoy reading about it.
The comments I will be making on this blog relate to renting low end apartments. This does not mean slum lording or tenaments, just apartments for the working poor.
When a tenant leaves the apartment is frequently a mess. There will often be food in the refrigerator even though the power has been off for some time. The floors and carpet will need cleaning as will the bathrooms. Chances are, the walls need painting and there are probably some holes to patch.
The conventional wisdom would suggest hiring a company to clean and fix up the place. Unfortunately, this costs money and takes time. In the meantime, no rent is coming in.
There is another way. You say to the prospective new tenant “If you will take care of cleaning the place I’ll forget about the security deposit.” Since tenants are generally short of cash this is usually very acceptable. Now, you know the place isn’t going to get cleaned. However, that doesn’t matter. They said they would take care of it, so they can’t complain about it later. Works like a charm in several directions.
Tenants leave the porch light on. Have you ever noticed homes where the porch light always seems to be on? Owners seem to be more concerned with saving on their electric bills. When I had a 4-plex I was always amazed by how often tenants would leave the porch light burning.
I have a chance to confirm my theory once again. One of the houses in my neighborhood had been for sale for several months. I noticed a couple of weeks ago the for sale sign was down and someone had moved in. Today I noticed the front porch light was on. I will have to see if I can find out if it is a rental. The new occupants lasted about three weeks before moving out. It was either a rental or a nothing down deal. In reality, a nothing down sale is a lease/rental although sellers sometimes fool themselves into thinking otherwise.
You have to keep them full.
My friend Don sold two sets of apartments about two years ago. He always kept them full with his unconventional approach to management. The new buyers have more conventional ideas about proper property management. As a result they are both running about 50% vacant.
What’s causing the problems.
In one case the apartments were heavily damaged when a city bus driver suffered a stroke and drove his bus through the building. (A true story, I am not making that up!) The owners are short of cash and have fooled around for almost two years getting the repairs done. It still isn’t finished and those units are not rented.
The other property is in the hands of an owner who does his own high quality repairs and improvements. Unfortunately, he is a busy perfectionist and the work doesn’t get finished in a timely manner. He has tried hiring people to do the work, but they don’t meet his quality standards.
The net result in both cases is many apartments sit vacant.