Andy owns 25 rental properties and manages them all himself. That is his full-time job. He checks out several every week, responds to tenant issues and complaints, and meticulously maintains his investments.
He enjoys dealing with his properties, does well dealing with his tenants (most of the time) and realizes that owning investment real estate is a hands-on investment.
The Property Owners and Managers Survey conducted by the US Census Bureau found that 53 percent of rental owners either would not or were not sure if they would buy their properties again. While the survey did not ask why they would not, one complaint that I see and hear over and over is that the property owner is having trouble with management issues, that is, being a landlord. Owning the properties is just fine, it’s probably the hands-on part that results in people saying they would not buy again.
Investing in real estate, if done intelligently, is a safe, profitable investment. I have been doing it for over 25 years and have always made money on the properties my wife and I have bought. But, we have a different philosophy and mental make-up than Andy does. We don’t like the phone calls, we don’t like dealing with tenant hassles, and we don’t like working on properties. So we don’t do any of those; we have someone else do it.
Andy has the qualities that make him cut out to be a landlord and not just a rental property owner. Not every owner of investment property has those. I have come up with three that will give you an idea about how well you will managing rental property.
So are you cut out to be a landlord? Answer the following questions. There are no right or wrong answers. They will be individual to you.
Question One: Do you deal with people well?
Some landlords are pushovers while others have little or no tolerance for tenant shenanigans, or in fact, anything out of the ordinary. The best landlords are somewhere in the middle. Whenever you deal with people, if you expect to be effective, you have to let some things slide. Knowing what, when and how much to let slide is the key. About the only way you can learn that is by both having the right temperament and a consistent method for dealing with issues. If you believe everything your tenants tell you, you will have problems. If you won’t tolerate anything outside your “system,” you will also have problems. Andy isn’t the most agreeable person in the world, but he is good enough, and his tenants know him and what to expect from him.
Question Two: Do you enjoy phone calls at all hours?
Count on phone calls coming on a Friday evening before a holiday weekend when you are ready to leave the house for a well-earned rest. And the problem the tenant will be having is one that cannot be put off until next week. If you don’t mind dealing with those calls, or if you can get someone to substitute for you when you want to be gone, you are cut out to be a landlord. Andy doesn’t like the calls, but he doesn’t get very many of them, since he maintains and inspects his properties regularly.
Question Three: Do you live close to your properties?
If you live within 15 or 20 minutes of all your properties, taking care of problems that come up is relatively easy. If you live an hour or more away, dealing with repairs and contractors is a profit killer. If you live three states away, forget it. You aren’t cut out to be a landlord. Oh, you can be a rental owner, but you are in no position to manage your properties effectively. The state of Arizona, for example, recognizes that fact in its landlord-tenant law, requiring any rental owner who lives more than 150 miles from his or her property to hire a professional manager.
If you answered “no” to one or more of these questions, you are not cut out to be a landlord. That doesn’t mean you can’t be a successful real estate investor, it just means that you won’t do yourself, your investments, or your tenants any favors by managing your properties yourself. Instead you would all concerned a favor by hiring someone who is able to effectively manage rental property.
The cost will be an actual savings when you factor in the loss of good tenants, damage to your investments and deferred maintenance that come with hands-off management. Owning rental real estate is a hands-on investment, it just doesn’t have to be your hands that are on it.
