Information is dangerous.
Unless you know what to do with it that is.
Just look at Anakin Skywalker. He learned the power of The Force and was a straight A student. But he took that information and drew the wrong conclusion from it. Make a few bad decisions and before you know it, you are Darth Vader.
I guess Star Wars is on my mind…
I’m reading Evicted: Poverty and Profit in the American City which tells the stories of the poorest tenants in Milwaukee. But is also interestingly tells the story of the landlords – who are these people and how does it work being a landlord of the poor?
Let’s make sure we use this information for good.
You Don’t Have to Landlord!
This is the number one thing I want to shout out to people.
Investing in rental properties does not mean you have to be a landlord – separate those in your mind!
So so sooooo many people delay or decide not to invest in rental properties because they don’t want to deal with tenants. YOU DON’T HAVE TO – YOU CAN PAY SOMEONE ELSE TO DO IT FOR YOU!
If more people understood that, more would take action and benefit from the incredible returns in rental property investing.
So when we learn more about being a landlord, don’t put yourself in the landlord’s shoes and think “I don’t want to do that”.
Use it as information about the role of professional landlords. Appreciate how difficult it is dealing with tenants and how there are big differences between good and bad landlords.
Many Different Price Points Are Possible
The book Evicted is about C class properties. The worst of the worst.
These would be the ones you purchase for $40k move-in-ready and rent for $550 a month. Great ratios, more issues.
The book goes to show that you can make money that way.
Cartman has the correct response to this info: “wha-eva – I’ll do what I want!”
That’s not the only way to get a return. The properties I discuss are quite different: B- minimum, $80k+ that rent for $850+ a month.
The number one way to reduce tenant issues? Buy properties that attract better tenants.
The typical tenant in the C class property makes $20-30k a year and relies a lot on government programs. They jump from odd job to odd job and putting food on the table each week is far from a given. (The book even goes into more C- “slum-lording” territory where the only income of $10-15k a year comes from the government.)
The typical tenant in the B- class property makes $40k a year and has a much more steady job. Not incredible career opportunities nor a ton of job security, but certainly employable.
Which one do you want to rent to?
Some Lessons from the Book
Give an inch and they’ll take a mile.
If every day is a struggle, you are willing to cut some people down to feed your kids. That’s the cold hard truth.
Rent is by far their biggest expense so often their landlord becomes yet another victim in the struggle.
If a landlord allows a partial payment once, it will happen regularly.
If the tenant is planning on moving out, good luck collecting any more rent. They know the only option the landlord has is evicting them, which they are going to move anyways and takes time. Free rent for a while!
But by far my largest learning from the book is how ineffective communication is between the landlord and tenant. Wow it is bad.
Zero hope of phone or any type of digital communication. The landlord has to go in person often to collect rent, pounding on the door until they finally open.
No proactive communication about an issue. An incredible number of the issues are minor and could be solved pretty painlessly. But it sure doesn’t happen.
Maybe the tenant is waiting for a broken window to be fixed and doesn’t pay the rent waiting for it to be fixed first. It leads to an eviction and fixed window for the new tenant.
Maybe they pay for something or do some work on the property and decide to deduct it from the rent. The landlord doesn’t see it that way and thinks they are paying short.
Communicate, communicate, communicate.
Interesting Read, but Draw the Right Conclusions
You can learn from the landlords of the poor, but make sure you learn the right things.
Don’t turn into Darth Vader…