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The best piece of advice you will ever receive as a landlord

Saturday, March 12, 2016

Have you ever wondered why is it that tenants get away with not paying rent but landlords dare not miss any mortgage repayments? Why is it that some tenants would prioritise making car lease payments over rent? While there are many lessons we can learn from traditional businesses, such as banks and leasing companies, immediate consequence has to be at the top of that list. As human beings, we are the sum of a lifetime of learnt behaviours. We know that the immediate consequence of late mortgage or lease repayments is penalties (and possibly repossession) so we make sure that payments are always made on time. So if we look at this pattern of behaviour from a different angle, then it is not hard to come to the conclusion that the number one thing to remember when you become a landlord is to be firm and consistent. Stick to your policies and avoid making any exceptions.


So why are we inconsistent?

Perhaps the biggest reason is that deep down, for most of us, there is an intrinsic desire to be liked. So we convince ourselves that it is better to be ‘the nice guy’ and forgive what may come across as a minor tenant transgression than to take the hard lined and be labelled an ‘a#$*&#e’. It is important to remember that asserting your legal rights makes you by-the-book, it does not make you a bad person. There is a fine line between being the ‘nice guy’ and being a ‘pushover’. Your perceived sign of weakness will incentivise your tenant to continue breaking the rule. Lets say we are talking about rent arrears, if your tenant misses a rent payment with absolutely no consequences then she will learn the continue her bad behaviour with absolutely no expectation that you will take any action. Thus starting a continuous cycle of bad behaviours.

Secondly, many of us are either uncomfortable or unfamiliar with confrontation. The easy part about being a landlord is to set our rules and policies at the outset. The hard part is enforcing these rules and policies when things go wrong. We convince ourselves that asking our tenant to make up the late rent payment will necessarily involve a confrontation. What we forget is that the confrontation we are uncomfortable with is normally a face-to-face confrontation where we get immediate feedback of the tenant’s reaction. But there are several mechanisms in place these days that keep you one step removed from your tenant and still allow you to communicate the breach and consequences to him. For example, issuing a 14-day notice, sending a text message or calling your tenant on the phone all help you manage tenancy issues without necessarily having to confront your tenant.


Tenants expect you to hold up your end of the bargain

At the very beginning of the tenancy, both you and your tenant signed a legal contract whereby you both agreed on certain rights and obligations. It is just as much the tenant’s responsibility to pay rent on time and look after your property as it is yours to impose applicable responses when your tenant falls short of his obligations.


Inconsistency breeds…

… confusion.

If you have a history of letting things slide then how can your tenant expect anything else?  The day comes when you do decide to toughen up then you will be creating a double-standard that is very confusing for your tenant.

Put yourself in your tenant’s shoes: if in the last five years he would sporadically make late rent payments without any consequences and all of a sudden one day you break from the norm by issuing a 14-day notice for something he has come to expect as being above board than you shouldn't expect him to be anything other than outraged. Oftentimes it is this types of inconsistency and confusion that spells the start of a deteriorating landlord-tenant relationship.


Some tips to help you stay firm but consistent
  1. Set out rules and expectations from the outset - Create a standard operational rules and policies for you landlord business (e.g. your rent arrears protocol and inspection schedule) and attach these rules to the tenancy agreement before it has been signed;
  2. Stress the importance of having consistent standards - Let your tenant know from the very beginning that there will be no special treatments. Deal with sob stories professionally and let the tenant know that you are simply being fair to all of your other tenants;
  3. Be honest with your tenant - Some tenants mistakenly assume that their landlord live in a Remuera posh pad and burns cash to keep warm at night. Let your tenant know that you are just an ordinary hard working person who is trying to build a business. Stress that while you sympathise with their situation you are not in a position not ignore the rules and let your business suffer;
  4. It is not personal - A lot of ill feeling can arise when the line between the landlord as a person and the landlord as a business gets blurred. When you handle tenancy issues make sure you are acting for your business not for your person. By de-personalising the way you communicate with your tenants, especially during tense situations, can help you focus on the matter at hand and deal with the issues in a professional manner.

 

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