Self Help

The appeal of owning real property and having tenants who are paying off your indebtedness (mortgage loan) for you appeals to most people looking to accumulate wealth. It is probably true that more wealth has been acquired through real estate holdings than using other mediums. There is just one problem. The vast number of tenants just do not pay on time. Not only do they not pay on time, but they create other costly problems for the property owner that far out-weighs the benefits.

Many renters are renting only because they are not sure that they are going to remain in the area or they would like to become acquainted with the area first and then decide where they will reside. These are the tenants you should welcome. They are homeowners at heart and will usually treat a rental unit in the same manner as they would their home.

On the other hand, the world is full of people who do not have the wherewithal to purchase a home. They have never been able to put aside money for anything. Owning a home is something they never expect to achieve. The first big problem is that the rent payment is the largest of their obligations. They cannot pay it in extended payments and so it is the last thing they pay each month. Meeting a due date is difficult. So they are late.

In the meantime you have been counting on the payment in order to make your mortgage payment. When you do not receive it on schedule, it creates a difficult situation for you. You cannot tell this to your tenant because, “since you are a landlord, you must be rich.” Because you are rich, you are expected to empathize with the tenant. You will now discover that your tenant has had a particular stretch of bad luck. Not only that, he will tell you that his brother-in-law was in a terrible accident and he had to loan him his saved dollars. It is amazing how charitable and kindly these people are. They are always helping some member of their family. Of course, because you are rich you should be able to give him a little extra time, right?

The caution is that when you become a landlord, you must learn to recognize these losers. You would be better off with a three-month vacancy than accepting these people. They will destroy you. Here are two additional tips that you should keep as a guide to avoid the above potential problems:

1. Do not become involved with welfare tenants. They have never owned property and damaging property is quite acceptable to them.

2. Do not accept tenants under the Section 8 Rental Assistance program. This program subsidizes low-income family rentals. The problem is that the agency doesn’t always permit the price that you are asking. You may get a tenant who is willing to pay the overage to you “under the table.” If you go along with this you are committing a fraud against the U.S. government. Don’t ever involve yourself in such a situation. If the agency won’t change its ruling, find another tenant.