(Over)Familiarity Breeds Contempt (part 2 of 2).
By Lou Gimbutis, Chief Homebuyer, Property Solutions, LLC
Now, Tommy’s landlord is a real nice guy. Watched the football game with him just the other Sunday. If all Tommy has to do to keep a roof over his head is call his landlord and ask, plead, or threaten, can anyone else guess who will not be paid in this scenario 100% of the time?
I fell prey to this with my first tenant, and never since. I have literally seen it drive dozens upon dozens of landlords clear out of the business. I have bought a number of houses from such individuals, and thereby solved the largest problem in their life at the time, the one that kept them up at night tossing and turning.
What I learned from real estate teacher and veteran landlord Louis Brown changed all this. For reasons far beyond the scope of this article, it is likely that you would be best served from an asset protection standpoint by holding your rental properties in land trusts (no, this is not legal advice, ask a competent real estate attorney). When your property is in a correctly set up land trust, you legally and truthfully do not own the property. The trust does. You are the trustee, and are prohibited by law in many trust documents (all of the ones I use) from disclosing to anyone who owns the property without a court order.
So, Tommy Tenant, I am not the property owner, it is owned by the 123 Main St. Land Trust. I am the property manager. I will respond quickly and competently to all requests for maintenance or problems with the house. But let me tell you something- the owner is horribly strict about the rent being in on time. Rent is due on the first, and if not received, an eviction notice will go in the mail on the second.
Less than forthright? Never! You could stand in front of any court in the country and tell a judge that you do not own a property that is in a properly set up land trust (ie: by your attorney). It is up to the judge to ask or order you to tell him or her who owns the trust. Why on earth would you tell your tenant differently?
The main point here is setting up a non-adversarial relationship, where you are not the “enemy”, and no resentment will grow during conversations over the rent. At the age of 27, this was especially important to me. “This guy here is rich- he owns at least 2 houses, and I don’t even own one! He can wait for his rent”.
The moral of the story is, my friends, quite simple- people fear (and sadly, respect less) that which they know best. Far better that your tenant(s) not know your limitations. Emerson said it best (as he usually did): “The only sin is limitation. As soon as you once come up with a man’s limitations, it is all over with him”.
Lou Gimbutis, owner of Property Solutions, LLC, has been buying and selling houses full-time since 2004, first in Michigan, then after moving to NC in 2007. He serves as Director of Education for the Metrolina Real Estate Investor’s Association