Stupid Landlords breaking the rules.

September 13, 2018

Stupid Landlords breaking the rules.

 

As a landlord this is a subject that effects the way I am ‘allowed’ to operate my business and quite frankly takes power away from the landlords and hands it to the tenants! Last night I had a message for one of our units and when I asked why the person was moving she proceeded to tell me what had happened. A landlord had been pressing her to move so they could ‘fix’ leaking pipework and the city needed them to be out so they could do the remediation. The landlord was going to the persons work repeatedly and, in the end, had her sign a ‘Mutual Agreement to end tenancy’, here in British Columbia where I invest mostly, this is a way for the landlord to not have to give notice where they ‘pay’ the tenant in either free months rent or compensate them for having them move out.

 

Landlords very often do not operate their business properly and as such are not able to afford to carry free months or if anything goes south. They also use various clauses as a way of increasing rents OR making a tenant move out who they may not want to continue with for various reasons, either messy tenant, noisy tenant or, in the case of some, just to increase rent because the market has jumped, and they realize they can get way more rent. The trouble with applying these tactics is, this is NOT WHAT THEY WERE MEANT FOR! 

 

 

 

Then Tenants complain these tactics are being used or mis-used and the government or regulating body in the area changes the rules to close the loopholes, or to prevent them from being used incorrectly. This now swings the pendulum of favour towards the tenants, and by doing that they remove the ability to use the same tool for the correct method in the future. This is a game, just like monopoly, there are rules, and its your job as a landlord (and business owner) to know the rules before playing. Then abide by the rules! Imagine not knowing the rules of a game of American Football, or Rugby for those that are really tough, and going onto the pitch (field), Imagine how long you would survive, not knowing what to do, where to go, you’d be crucified! It’s the same in investment real estate. Now imagine if you knew the rules, went onto the field but didn’t really use the rules as they were intended and started ‘bending’ the rules, how long before the other players on both teams started to complain. You then try and justify your reason for bending the rules and then complain when they change to rules to either forbid what you were doing, or, make it so you can’t do it. Now its unfair to you right? WRONG!

 

 

The rules are written in real estate to ensure we follow them, people will always try to bend them on BOTH sides, and it’s actually really simple, if everyone follows the rules and plays within the rules as they were meant to be, and what they were meant to be used for, it works. Landlords complain about tenancy rules, such as here in BC recently they changed the law, so if someone is living in your house and you have a one year contract, landlords were using it to ‘screen’ their tenants either making them move out on completion of the term, or, making them sign a new lease at a way higher rent than allowed to increase (as the market was rising fast). Here in BC the government sets rental increase amounts with the same tenants and restricts the amount the can be raised by to help tenants stay affordable in their homes. This is where landlords should screen their tenants better, or if they are in a market where the tenant profile may be less than grade A, allow for that in your business plan so you can cover when ‘unexpected’ things happen. They can also screen their tenants properly, instead of using a clause to be the screening tool. This comes from landlords being lazy or desperate, most of the time, not always, but most of the time. People buy an investment property, have trouble with carrying both properties for more than a month together, so get desperate, place a tenant and then do a mediocre onboarding process at best, but usually just sign here and here, where’s the cheque and off the go, and usually only visit the house again when the rent is late, or does not appear.

Imagine having a business where you open the shop, then go away and leave it and then only come back when the money stops coming, then complain it’s the staffs fault, or the clients for stealing when no-one was there. This is what a LOT of landlords do with houses. Then they complain when regulations change in the favour of the tenant because they were doing something they shouldn’t, or they were getting greedy instead of staying with the good tenant they had at a price that worked, but now they can get way more money they bend the rules to get new tenants. Then complain when those rules get changed.

 

Now don’t get me wrong I have had some pretty bad tenants over the years, and the market I am in is middle class housing and affordable housing, but we still screen, plan for the downs associated with each decision we make, i.e. put enough money in a reserve fund to allow for the minor damage (or sometimes major) that can occur. Insure against the big downsides like a tenant wrecking your place and not being able to rent it out, fire, or even worse.

 

We get a bad wrap as landlords and when someone hears we have investment property (who doesn’t invest in real estate themselves) the usual comment is oh are you a ‘slumlord’? I used to be bothered but then I realized a couple of things, one, it’s not true and two, they obviously do not understand the power of real estate and how it can change their lives and financial futures. Now when we as landlords and investment real estate business owners break the rules for a bit extra profit, or to kick people out who we either didn’t screen properly or did not manage correctly, then it makes us look worse and helps to reinforce the belief system that people say about us even if it is untrue.

 

We often act (almost always act) on emotions, emotions of greed and fear. For example, people are fearful as the rules in British Columbia for tenants is swinging towards the favour of the tenant, fearful they will get their property damaged and have no recourse, fearful they will not get paid, fearful they will not be able to do what they have been because the rules changed. OR greedy now more people are selling there are less rentals on the market, vacancy rates are so low the government has created a ‘task force’ to deal with the problem, therefore rents are going up a lot faster than they should, so the ‘greed’ people are buying in and getting lots of cashflow. The truth is the market is the market and it will go up, down, sideways, and just like any business or even relationship for that matter the rules will, and do, change, YOUR job as a landlord is to know those rules, abide by those rules and if you do not agree then advocate to the correct people to get them changed the correct way. DO NOT bend, change, ignore or disregard the rules and then complain you get your wrists slapped and penalized for not following them.

 

For me and our team we look at the rules, figure out what we need to do to stay complaint, make sure we adhere to the rules and assess the business model to make sure operating the way we do is still positive for EVERYONE involved, which includes, the investor (if its you then that’s you), the tenant, yes the tenant, they are after all your customer that spends about 12-20K+ every year in your business, and all the people involved, property management, trades etc. If the way we operate does not meet that criteria we change the way we operate, but always within the rules of the game. When the rules change we change and adapt to suit. We do not get mad, get upset and remove ourselves from the game, the only person that really loses then is you as the long-term benefit from owning investment real estate is taken from us, and the only person you rob of the financial benefits in the future is you!

 

To wrap up my point, if you are a tenant, follow the rules, if you do you have a stronger position if a landlord does not follow them. If you are a landlord FOLLOW THE RULES and use them only for the reason they were intended! If there is a flaw in your business usually it is with YOU and your systems and procedures, fix them and stay within the rules this way you will have, percentage wise a much better business and experience, a lot less headaches and ultimately a better financial future. I would love to hear your feedback about what you think about landlords who break the rules and tenants who break the rules. Sometimes looking from a different angle can help you become the master of your business and not a victim of circumstances! For tips on managing your property and your tenants please go to www.rentalhouseprofits.com and there is a downloadable eBook for the price of a cup of coffee, whats it worth for your sanity? 

 

 

 

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Wishing you every success

Gary