by Mike Butler

Recently, I had the pleasure to participate in a national conference for landlords. During my presentation, I asked the question: “How many landlords think your tenants are your customers?” The majority of the room raised their hands. Then I dropped the mental bomb and made the statement “Your tenants are not customers!” After making this statement, I intentionally paused for a few seconds to simply observe the reactions in the room.

It was amazing. The expressions on the faces in this room full of landlords ranged from mostly confusion to one fella who absolutely refused to have an open mind even after paying a registration fee to attend a learning environment focused specifically to benefit landlords. This poor fellow reminded me of the selfish greedy child who has to win at all costs or pick up his ball and go home. He decided not to play and chose to leave, making a scene, slamming a chair, and stomping his feet. What an eye-opener to childish behavior on the part of a self-proclaimed 30 year landlord. (I’d expect this kind of behavior from some folks who’ve applied to become one of our tenants.) This was unexpected entertainment for attendees as well.

That’s why we have two ears and one mouth. We learn by absorbing information and new ideas. What’s the definition of insanity? Doing the same thing over and over, but expecting different results. I’m guilty of this myself. As investors, property managers, and landlords, we should understand the legal position of our role as landlords and the role of tenants. In addition to the legal definition part, we’re actually running a business. Our objective with our investment properties is to increase our wealth, cash flow and quality of life. It doesn’t matter if your business is small or large, it’s still a business.

Business Relationship

Here’s your challenge. From a business relationship standpoint, are your tenants customers? Seriously, think about it for a moment. Many landlords and experts say our tenants are our customers. Most retail establishments have slogans “The customer is always right.” Do you really want to adopt a slogan “Tenants are always right”? Hmm… did you hesitate a minute here on this one? Can you etch in stone or really think and believe tenants are always right?

Don’t pull the trigger yet on your mental knee-jerk reaction to these comments. If you operate a retail store, you’re at the mercy of your customers and the customer is always right slogan can apply. You must get them in the door to buy. If you operated a flower shop, would each customer have to fill out an application and sign an agreement? If you operated a stop and rob food mart, would your customers have to fill out an application and sign an agreement to buy beer, smokes, or lottery tickets?

Don’t get me wrong, there are businesses requiring customers to fill out applications and agreements such as rental car companies, loan companies, credit cards, and more. The point to understand is the wide range or scope of the word “customer”. There are cash-paying, no-agreement, always right customers one end all the way to the other extreme of qualifying customers after an application process. As far as the business relationship definition, try this on for size.

Tenants are Not Your Customers.

Try this mindset:

Your Tenants are Employees!

Think of them and treat them as highly valued employees. This should be a good thing. At the national conference mentioned earlier, the landlord who couldn’t accept this idea of tenants being employees vividly displayed his attitude that customers are more valuable than employees. Wow! What a horrible boss and leader.

Thinking of your tenants as your employees may generate a tremendous amount of very intense and emotional opinions. Your range of reaction to this comment is based on your experiences of the word “employee”. It’s great! Use it to your benefit. A very similar concept might be Dr. Stephen Covey’s paradigm shift of the position or role of boss vs. leader. If you are a boss and follow the stereotype role of boss as a dictator and the person who simply announces things to do, we can all grasp the tremendous amount of negative vibes associated with this kind of behavior.

On the other hand, if the “boss” has behavior more in line with a “leader”, the boss becomes more of a role model, a positive, respected, and friendly person. I’m not an expert on all of this stuff, but I’ve attended several courses on this subject and learned how to put these ideas and concepts into my real estate business. We can apply many of the same ideas in our world of real estate investing and dealing with tenants.

Keep an open mind here. Don’t fight or challenge this thought-provoking brainstorming session. On the surface, I’ll admit tenants are customers because we provide a product and/or service for a fee and they pay for it; however, how can you make it better, more profitable, more efficient? Here’s the education challenge. Instead of the typical landlord-tenant relationship, let’s make a relationship change to employer and employee. With your tenants becoming your employees, you become their “leader”. Interesting? Employees should be viewed as a great asset. Good employees enable your business to be profitable and should make your life easier, not harder. Try this exercise. Read the following statements and see if you can substitute the word “tenant” for the word “employee”.

• You should have a good relationship with good employees.
• Good employees are valuable.
• Exceptional employees should be rewarded for outstanding performance.
• Employees have responsibilities.
• Employees are expected to perform satisfactorily or suffer the consequences for poor performance.
• An employee who is a bad apple, can ruin the good apples.
• Allowing one employee to remain with poor performance can bring down performance and attitudes of good employees.
• Not treating all employees the same is not fair.
• Employee appreciation programs promote good performance, loyalty, productivity, and profit.
• Employee’s length of service should be a guideline of additional benefits to employees promoting employee retention.
• Outstanding or exceptional community service or personal achievements by employees or their immediate family members should be recognized.
• Employees with poor performance should be dealt with in a fair, consistent manner, including termination.
  Just like above, substitute the word “property manager” for the word “employer” and “tenant” for “employee”.
• Employer should be responsive to employees concerns.
• Employer should be a leader, not a boss.
• Employer has responsibilities along with consequences.

Got the idea? This attitude kind of opens a new attitude in dealing with tenants. Good, effective communication among responsible parties sets the stage for great results. I assume you really want to have the lifestyle of the successful real estate investor as played out on the infomercials on late night TV. Once again, it doesn’t matter if you have one or two investment properties or hundreds, this paradigm shift of thinking of tenants as highly prized valuable employees should really get you some long overdue results as seen on those infomercials.

Don’t keep this focus on tenants only. Spread it around. How about your own help? Office staff and maintenance staff should be treated as highly valuable employees. Your furnace person, electrician, plumber, roofer, lawn service provider, painter, carpet installer, carpenter, and so on. Here is an absolutely powerful and cheap way to reward your employees. Most investors I know have had a job or still have a job today. For those of you who are “unemployable”, go back with me for a moment to the days of punching the clock.

Think of the holiday season. From Thanksgiving to the end of the year, what happened to those folks (including myself) who have jobs in government or the corporate world? Holiday parties and more holiday parties were offered for the unit I worked for along with invitations to holiday parties for all of the other districts. It was almost a competition atmosphere about who could throw the most extravagant holiday party. The bragging rights for the best holiday bash usually went to the police district who had live entertainment, a dance floor, a huge hall, plenty of food, booze, beer, and even limousines! Sounds great doesn’t it?

Switch gears with me here for a moment. While I worked my full time job as a police officer and observed all of the free holiday events for me and my wife, I happened to hit the pause button and reflect on the holiday happenings of those who are valuable to me in my real estate investments. Remember my furnace person, electrician, plumber, garage killer, etc.? Most of these folks have mom and pop operations. (that’s why we use them because they are usually cheaper than the ones who have the full page ads in the yellow pages) What are they doing during the holidays and where are they going? Do they get invitations to any holiday bashes? I guess some do if their spouse has a job somewhere.

Here is what I do every year for my vendors, contractors, resident managers, and those who are an integral part to my real estate business. For the last several years I reserve the banquet room at a nice local Mexican restaurant for the Saturday before Christmas. We mail homemade full page simple invitations to the 8th Annual Vista Holiday Bash from 6pm to 10pm. They can bring their spouse or significant other. This banquet room also has a very small bar and we include an open bar as part of this annual holiday event. We’ve never had any issues of anyone abusing the open bar. In fact, my experience is just the opposite. These folks are not used to the extravagant holiday bashes and are very, very appreciative of this event to benefit them for free. In fact, every year they try to pay the bartender for their drink and are amazed when the bartender waives his hand and says “no charge”.

The restaurant has a “buffet style” of presenting the food on a portable steam table. Nothing fancy, pick and choose what you want and how much. From tortilla chips and hot cheese dip to beans, chicken, beef, and soft flour tortillas along with several vegetables and sauces. This covers almost every food tastes including vegetarians making me politically correct again. Good music, fun, food, and drink set the stage for these folks to network and have a good time. I usually take the floor around 7pm or so and introduce each and every vendor by name along with their product or service and a little light hearted humorous story on each person. This is powerful. I’m fortunate to have a garage killer who has outrageous stories and he usually grows into the center of attention before all is over.

These folks come from all backgrounds and dress accordingly. My electrician starts talking about this annual event in June of each year and said his wife really looks forward to it, even though she’s not much fun (his words, not mine). Okay, now the bad news. This annual event cost approximately $600 total. That’s right, room, food, booze, and tip for the waiter and bartender. Believe it or not, this is a nice restaurant just two blocks from my office.

The rewards and paybacks can’t be measured. Guess where I am on their list of valued customers. I’m willing to bet I am probably at the top of their list. I might not be the biggest, but I am probably one of their best. We’ve had a rash of horrible storms and tornadoes recently and guess where my tree guy put me on the list of next in line? I didn’t even have to call him. He called me asking where to go first! In addition to the great business relationship this kind of event promotes, it makes me feel like a million bucks to see the wonderful feeling of appreciation and value of the skills, trades, and workmanship of these folks. Several vendors told me no one has ever done this before. This is a great way to let those who make your business successful know that you really appreciate them, their work, and relationship. Not only doing a good job for you, they are a walking, talking billboard for your business – by referring tenants, sellers, loan customers, etc.

Work on this one now and start planning for your own event for this holiday season. I’d like to hear how your event works for you. Here is a helpful list of those to consider. Invite your banker(s), furnace person, electrician, plumber, carpenter, lawn service, resident manager(s), office manager, bookkeeper, CPA, attorney(s), siding and gutter person, tree service, pest control, roofer, insurance agent, highly valued real estate agent, auto mechanic, Section 8 inspector(s), helpful service clerk(s) at local hardware store, paint store, supply house, newspaper for your classified ads, your painter, garage killer, trash/junk hauler, and the person who lets you place your dumpster in their rear parking lot for free.

This is just a small list to assist you in identifying those who might be important links in your strong real estate chain. So remember, good employees are a good thing and make your life easier and more profitable.

He was featured in Money magazine, June 2001, in the article “Can Real Estate Make You Rich?”. Mike Butler is a Kentucky licensed real estate broker, a realtor, member of KREE, and a charter member of NARPM.

Q. Are race, color, religion, sex, national origin, familial status and handicap the only protected classes?

A. These seven categories are the only protected classes under the Fair Housing Amendments Act of 1988. However, many state and local governments often have their own laws and ordinances making housing discrimination illegal, and may include categories in addition to the ones protected by the federal law. For instance, a city’s ordinance may prohibit discrimination on the basis of marital status. If you refused to rent an apartment to two people of the opposite sex who are not married, but will rent to two people of the opposite sex as long as they are married, you have not violated the federal Fair Housing Act, but the city could take action against you for a violation of the local fair housing ordinance. Besides marital status, other categories sometimes protected by local ordinance or state law include: sexual orientation, source of income, and age. Occasionally, an additional category may be added based on a particular local condition. For example, Cincinnati’s ordinance protects people of Appalachian heritage from discrimination, while Denver’s includes military status as a protected class. If everyone is treated fairly and consistently, there should be no need to be overly concerned with the particular protected groups of a locality.

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By Bill Bronchick

There are over 80 million lawsuits filed every year in the United States. Landlords and real estate investors are especially susceptible to liability. Are you a target? Are your assets easy to locate? Is your real estate titled in your name?

You wouldn’t walk around with a financial statement taped to your forehead would you? So why would you have your most valuable assets exposed to public scrutiny? Anyone can go down to the county courthouse or recorder’s office and look up the owner of any property. Real estate records are now computerized, so all of your real estate holdings can be located at the touch of a button!

Any mortgages on your property will be recorded as well. Most recorded mortgages will state the amount of the original principal balance and the date the mortgage payments began. All one has to do is figure out the balance of your mortgage and subtract that amount from the market value of your house. Bingo! Now they know how much equity you have and hence whether suing you is worthwhile.
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by William Bronchick, JD

You can’t expect to reduce your risk of getting sued to zero, but you can take steps to reduce your risk as much as possible. In any situation where your money is at risk, ask yourself, “Is there a better way?”

Know the legal and financial risks of the situations in which you place yourself, your business, your family, and your assets. Without covering every issue involved, here are a few common mistakes that investors make–novice and experienced alike.

Poor legal forms

It’s amazing how short-sighted novice investors can be when it comes to shelling out money for good legal contracts. They often buy contracts at discount office supply stores, from Internet websites, or borrow them from friends. However, a real estate deal is only worth the paper it’s written on.
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by William Bronchick, JD

The market is slowing and investors are drowning in house payments. Is there an end in sight? Probably not. But, there is something you can do about it. Dropping the price until you get it sold is one way to do it. But, I’ve got a better solution–sell the house.

What amazes me is that most sellers don’t “sell” their houses. They advertise houses, they list houses, but they don’t SELL houses. In a good market, you can rest on your laurels, but in a soft market you have to be willing to do something different. Stop whining about the slow market and start SELLING your houses!

1. Make Your Listing Look Great!

Most MLS listings are boring, informative, and don’t sell the house. That’s because most people leave it up to the real estate broker to create the listing, which is communicating with other brokers. Instead, take charge of your listing. Make sure the pictures are great, not average.

Photoshop the pictures, so there are excellent photos of the front, the kitchen and the most appealing features of the house. If there’s a grey sky, wait until there’s a blue sky. If there’s a dead lawn in the photo, pick up that Photoshop paint brush and make it GREEN.

When a buyer’s agent is scanning the MLS with their clients, you’ve got two seconds to catch their attention and initiate a showing–make a good first impression!

2. Use Lots of Directional Signs

A sign in front of your house is good if you are on a main street, otherwise you have to get traffic by your house. Use dozens of directional signs from the nearest main road to your property. On weekends, tie bunches of balloons to the main sign on the road.

3. Use a Professional Sign in Front

Do not, I repeat DO NOT use the cheap sign from Home Depot, particularly the info tube that requires you to roll up your flyer. Invest in a solid metal-framed sign that has an attached flyer holder that makes it easy for people to pull out your flyer.

If the house is vacant, have an arrow with the words “More info” pointing to the house, and put your flyer box on the stoop of the home. This will get people peeking into the home, which is what you want.

4. Get a GREAT Flyer

It amazes me how boring and technical most home information flyers are prepared. The lazy real estate broker usually prints the flyer in black and white off the MLS listing computer. Instead, use a full-color flyer with excellent high-resolution photos of the inside.

If you are not a digital camera buff, go on craigslist.org and hire a high school kid to shoot and edit some photos. Sell the features of the house, not the facts.

5. Sell People on the House

Most sellers show houses, and say, in effect, “Ya’ll come back now.” Let me ask you a question: Is this what car dealers do? Of course not! The cardinal rule of a car salesman is to NEVER let a customer off the lot. Why should selling houses be any different? If you elicit the right information out of the buyer to understand that he is in the decision making mode, push him to make a decision.

Can you remember walking into a car dealer thinking to yourself, “I’m just looking, I have not made up my mind yet”? And then, for some inexplicable reason, you left with a new car! Why? Because that salesman SOLD it to you, he didn’t just let you test drive.

Not all buyers are ready to make a decision, but if he’s been looking at a few houses for a few weeks, he may be ready, even if he says otherwise. Be ready with a contract and try to get the buyer to leave you a deposit check, even if it is refundable. Get as much commitment as you can. Instead of showing the property, SELL it!

by Vena Jones-Cox

Q: We’ve come across some problems we thought your readers might also be encountering, hence this note to you for your consideration in possibly addressing the below subjects in your newsletter. The past 2 weeks have been really frustrating as I have been stood up by prospects at scheduled showings 8 times. We try to prequalify interested prospects over the phone, explaining our screening process, up front money needed, the lease/option as a way to become a homeowner, etc. We always ask if they have driven by the property and also tell all prospects when scheduling a showing to please call if they need to cancel. Of 11 scheduled showings, I actually had one show up, two had the decency to call me and cancel, and 8 just failed to show.
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Have you ever had a tenant leave in the middle of the night or the middle of an eviction? Did you ever wonder what to do? Basically when a tenant abandons the property, you do not need to file an eviction or wait for the sheriff. You can change the locks. As for the tenant’s stuff, in most states you can simply toss it. You should check your state or local law to see what your legal obligation is to store the items for the tenant.

However…

If you are not certain whether the tenant has abandoned the property, you should not change the locks. If you have the keys, you could enter the premises, but knock first. Whether or not the tenant has abandoned is often a judgment call, looking at a combination of factors, such as:
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