There Are 3 Types Of Rental Property Owners - Which One Are You?
After being in the property management business for many years, across many states, dealing with all kinds of properties we have discovered that there are 3 types of property owners out there. The goal of this article is to help you see where you fit on the spectrum, and what the pros and cons are to each different style. Please keep in mind that these are only our opinions based on experience, there may be another type of property owner that we haven’t met yet! =)
The Penny Pincher.
So, the 1st type of property owner is what we like to call the “penny pincher” or the “nickel nabber”. These folks are cheap and tight; about everything! Now, the overall benefit of being this way is that you reduce the amount of out of pocket expenses; which is the goal of owning rental property. However, there are a slew of cons related to this behavior. First is that when you elect not to fix things or make improvements for your tenants their tenancy ends up being shorter and more hostile compared to an owner who takes care of things as they arise.
For example, we had a property owner who bought a house that was in severe disrepair, but it was rented. The rent was extremely low; just $425/month! The tenants of the house agreed to the squalor-like conditions, however the owner then decided to double the rent without fixing anything! The tenants then rebelled and submitted dozens of complaints to the city’s housing violation department. Safe to say, the owner of this house was inundated with mandatory violations to repair. Still, the property owner chose to fix just a few of the items such as the hole in the roof, and broken foundation. The tenant ended up withholding rent and dragged out 4 month’s worth of occupying the property during the eviction. They ended up leaving the place a mess, and not paying a dime more in rent. The owner then came to the realization that her attitude and behavior was extremely counterproductive, and not sustainable. After over $20,000 in repairs, thousands in lost rent, and a year’s time she finally learned her lesson!
Another important item to note on this type of owner is the management company perspective. When you are constantly haggling, negotiating, arguing, and combative about requests it puts the employees of the company on edge and not willing to help you more than they must. Look at it this way, you are hundreds or thousands of miles away, and then you have boots on the ground at your property. Wouldn’t you want those workers to have the most positive impression of you as possible? THEY ARE TAKING CARE OF YOUR ASSET! However, when you constantly make their life difficult, they won’t be motivated to make yours easier. The most important (and easiest) thing you can do in business is be respectful and understanding. The more resistance you put up the harder your life will be. It’s a guarantee!
The Active Owner.
The 2nd type of property owner is where I personally tend to fall. We call this the “active owner”. What we see is that this owner wants to enjoy the benefits of our rent collection, accounting, maintenance facilitation, live emergency hotline, and more, but prefer to take care of maintenance and/or leasing on their own. Myself, I prefer to handle all the turnovers in order to save costs. Turnovers can run in the thousands, which eats away at my bottom line. So, I choose to use all of Nexus’ other services but jump in to take care of turnovers as they occur. In my opinion owners that have the capability to do this should. You save a great deal of money and learn more about your property and the condition tenants expect. If you are a spreadsheet owner (someone who never steps foot inside) you don’t have a baseline of the property and/or what tenants are dealing with.
The Hands Off Owner.
The 3rd type is what we call the “go ahead owner”. This owner is by far the rarest, but an interesting one at that. What this type of owner does is approve each and everything that comes across to them. Whether it’s a maintenance request, suggested upgrade, request from the city to inspect for tax purposes, tenant applications, etc. They just say “yes” to everything. Now, this does have benefits because for instance when a tenant needs something fixed there will be no issue with getting it taken care of. However, the downside to this approach is that eventually you will get taken advantage of by the tenant, the property manager, and more. For example, if you have a property manager who is untruthful, they could easily say “Mr. Owner your basement foundation has a leak you need to have it dug up and re-built, and we can do that for you.” The untruthful property manager will look for work, and you better believe they will be making a hefty profit.
So, in sum it is suggested that you take characteristics of all 3 types of property owners and gel them together to make the most give + take style approach. Sometimes you need to pinch pennies, sometimes you need to get your hands dirty, and sometimes you just have to say “yes, go ahead.” It’s the nature of the business. Learn how to walk the fine line of property ownership and you will have a successful career, but steer too far in either direction and you will fail!
We would love to hear your feedback on this topic! Post a comment below so we can start a discussion!
Gregory Rice is the Vice President of franchise sales for Nexus Property Management™.
Nexus Property Management™ is a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
Your Property, MANAGED®
The Real Estate Investing Authority®
Connecting You To Better Living®
You Could Own A Nexus Property Management™ For Less Than You Think!