Eliminate undervalued assets when investing in one-family leases
Investing in real estate is a great way to improve your financial future and gain financial freedom. Unfortunately, real estate education is associated with a lot of bias and ignorance. For example, how investors choose to focus on “good” tenants over “bad” tenants can have a significant impact on their business. While all investors would prefer to get rid of bad tenants, this may not be their goal.
The information shared on social media and at real estate meetings is usually aimed at getting rid of bad tenants. However, with thousands of tenants over the years, I can tell you with 100 percent certainty that you should focus on keeping good tenants. Why? Do you know what are the biggest expenses for most homeowners from year to year, besides mortgages? You guessed it – tenant turnover.
I argue that the most costly tenant turnover a landlord can sustain is a tenant who pays like clockwork even if he leaves the place clean after he leaves. Losing a paying tenant who is problem-free and reliable is an advantage to the landlord, and once you lose it, chances are good that you will end up with a problem tenant.
Quite frankly, problem tenant is easy to deal with as every state has laws and procedures to remove non-paying or non-performing tenants. Rather than discussing and highlighting this process, why not talk about ways to retain good tenants so you don’t lose a true asset?
If I take care of my good tenant and let them know they are special, they will most likely invite their friends to enjoy the complex the next time I have a vacancy. Rewarding good tenants doesn’t take a lot of time or money. The following simple ways to thank my top tenants encouraged me to stay longer.
Refuse to raise rent.
If the tenant paid their rent on time for 12 months in a row, I thank them and tell them that their rent increase, which should have been X, has now been canceled and we will return to it next year.
Be proactive in repairing.
If the tenant has been great for several years, I reach out to him and ask if he needs anything. Thus, I learned about leaking taps, broken stove burners and other minor problems that the tenants did not want to complain about. I’ve repaired or even replaced items to thank them.
I suggest updating.
If the tenants have been good for several years, I ask them if they want new carpet or new paint in the bedrooms.
Why am I doing this?
I want good tenants to stay and I don’t want staff turnover. If I have the ability to have quality tenants stay longer and invite their friends and family to take up other apartments, I can create an enjoyable community where everyone knows and loves each other and will have higher returns and less landlord headaches.
Over the years, I’ve found that my quality tenants stay longer because I let them know they are good tenants. The few that I lost were due to the fact that they left the area or bought a house, which is good to hear about. I delivered some welcome mats to tenants as they close in their new homes as a little gift to congratulate them.
Investing in real estate is a people’s business, and your tenants are your clients. As property owners, we must provide excellent service and I suggest that we focus on clients who deserve rewards. The more good tenants you have, the better and more profitable you will become.
Troubled tenants get too much airtime because they can easily tell scary stories. Instead, let’s celebrate and talk about good tenants as they make real estate investing fun and profitable. Do yourself a favor and find out about your good tenants. Then try to thank and reward them so they stay longer.
Michael Zuber has worked in Silicon Valley since graduating from Santa Clara University over 20 years ago. After wasting time and money in his 20s, he started investing in buying and owning rental properties and never looked back. Over the past 15 years, Michael has expanded his portfolio of rental properties from a single rental home to financial freedom. Now that he no longer has a full-time job, he shares his story in his self-published book and on YouTube, both titled One Rental at a Time.