Government Intervention — and We Landlords are The Targets!

Aug 25 2011

Government Intervention — and We Landlords are The Targets!

Posted by Aaron Cruz in Finance Online

I love reading the various articles here on the BiggerPockets Blog, and when I am moved by a topic I always try to add constructive comments.

In May of last year Florence Foote wrote a great article regarding Rent Controls and their negative impact on both the quantity and quality of rental units where ever rent controls have been implemented. You can read that article here:

There were some great comments on the article, and of course I added my two bits. As is always the case when I participate in these discussions I click the box that notifies me when new comments have been added.

So, imagine my surprise when I got a notification this week that a new one had been added to this article an article that was over 15 month old. I headed over to the original article only to find a very lengthy comment which appears to have been provided by a person who clearly has never been a landlord. Here is but one statement that got my attention and this is a direct copy:

If the landlord doesn’t like rent control, he can sell his rental properties and move out to the country where he can feel free to set the rent as high as he wants.

After reading that opening sentence and the remainder of the comment, plus the follow-up to my response I was struck by the following

With increasing certainty our business as real estate investors, especially for those of us who are landlords, is going to come under ever greater attacks as the economy continues to decline, fewer buyers are able to get credit for home purchases, and more and more families will have to rent.

You dont need a crystal ball to figure this out! All you have to do is read the many articles that discuss how this or that politician or advocate wants for our economy to be more FAIR which usually means if you have figured out how to generate positive cash-flow or amass wealth through your real estate portfolio, the politician or advocate believes you are the one who needs to be more fair and they think nothing of taking what you have earned and giving it through taxation, controls, favorable tenant laws, etc to others.

I know getting into a discussion regarding politics is a dangerous place to go, but as a real estate investor I firmly believe this is not a discussion regarding politics, but a discussion about protecting your business especially in the face of individuals, similar to the individual commenting on the referenced article, who harbors strong opinions about landlords and the returns they earn from their rental portfolios.

WE ARE THE TARGET! WHAT ARE WE GOING TO DO ABOUT IT!

We are very fortunate to be in a business that has the opportunity to provide one of the basic needs on Maslows hierarchy of needs. Safe, clean shelter. And, if we are good enough at what we do buy right, select good tenants, and properly train and manage those tenants we can make a great living. And, WE SHOULD!

But we wont be if we dont start standing up and defending our business and our profits.

Here are few thoughts I have on how we can advance our cause and protect our business. Some of these items will surprise you.

1. Dont be a slumlord. If you are going to be in this business and you dont want the do-gooders or politicians putting you in the spotlight, make sure your properties are in the best condition possible. Safe and clean is always a great standard to strive for.

2. Select great tenants. Easy to say I know. But if you select a crappy tenant or heaven forbid a professional tenant you will most likely find yourself in court defending yourself and your business at every turn. And, in the process, you as a real estate investor will be made out to be a slumlord, even when you are not one.

3. Dont purchase rental properties that are marginal deals. There is nothing worse then trying to make a deal cash flow when the price you paid for it makes that effort impossible. And, what do you think happens in situations like this? You find that you are less and less able to respond to legitimate maintenance issues and most likely you will accept the first tenant to submit an application because you need the rent.

4. Have cash reserves. This is one area where many wanna-be landlords fall way short. Consider the situation in item 3 above. You paid too much. You are bleeding cash. You accept the first person to submit an application and they stop paying rent in the second month. OUCH! How do you survive while you are getting the tenant out (in some places this could take months) and still make the mortgage payments while keeping the property in a safe and clean condition? You do it with reserves, and having them will help you be a responsible landlord and not easily tagged as a slumlord.

5. Seek out, join and actively participate in your local property owners association. This is one place where everyone involved understands the constant pressures you as a landlord are under. As a group, greater influence can be exerted to counter the constant drum of activists or politicians.

6. Actively participate in local and state politics. I have to admit, this suggestion is as repugnant to me as an afternoon having a root canal. Yet, as our current economic situation continues to struggle, and there is a constant drumbeat increasing in volume every day regarding those that have (that would be you) and those that dont, if we dont start participating NOW we could very well be regulated out of business.

There you have it. We will never be able to change the perceptions of everyone regarding our business, but if we dont get started now working on the perceptions of at least one person, we may not have a business to support our goals and dreams.

Best of luck!

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