As you manage the tenants of your properties remember you aren’t managing properties, you are really managing relationships with people.
As the end of summer looms, I am looking back fondly on all the adventures this season held for me. Like many of you, I found myself behind the wheel driving long distances. One of the things that I have come to realize over the past 25 years of summer travel are that there are two kinds of drivers: those who use cruise control and those I call “tinkerers.”
I myself am a cruise-control guy, while my wife falls squarely in the tinkerer category. It’s been my experience that despite these very different driving styles, we typically end up reaching our destination at nearly the same time. These same titles can be applied to investors as you manage the tenants of your properties (read that again, because you aren’t managing properties, you are really managing relationships with people.)
CRUISE CONTROL: I often find myself on long, straight stretches of freeway in the Southwestern United States, and putting the car in cruise control is one way to make sure things don’t get too crazy in regard to speed. The cruise-control management style is more conservative and usually has a combination of the following characteristics:
- Set it and forget it: What has worked in the past will more than likely work in the future. Also known as the “if it ain’t broke, don’t fix it” approach.
- Comfortable with consistency: You are satisfied with the same process and the same results. You like predictable outcomes.
- Low-risk tolerance: You know that by using your tried-and-true, proven methods, you get the results you are satisfied with. The potential gain of change is not worth the pain.
- Stay in your lane: You typically invest one way, whether that is long-term holds, flips, or short-term rentals.
There is absolutely nothing wrong with this style of management; think of it as being a successful, lazy landlord. Predictable patterns create predictable returns, and depending on what you want and where you are in your investment life cycle, this approach makes sense. We always stress the importance of finding the right “business partner” to be your tenant, and when done properly, that tenant can be expected to pay you $120,000 over five years. Identifying that right tenant is critical when you consider those numbers.
THE TINKERER: We’ve all ridden in a car with the tinkerer, and for some it creates great anxiety; for others it is as natural as breathing. The stop-and-go style of driving, weaving in and out of lanes, always looking for a way to get to the destination a little bit quicker, easily define the tinkerer. Considered a more aggressive approach to investing and managing, the tinkerer can be characterized as follows:
- Speed up, slow down… on repeat: Unsettled by doing the same old thing, you find the ever-changing pace of managing in this style exhilarating. Imagine riding the waves of real estate and you will have a clearer vision of this characteristic.
- Changing lanes: You are always looking for the latest and greatest opportunities, often willing to give up on one good thing in hope for two of a better thing.
- Head on a swivel: Rather than focusing on the ultimate destination, you are constantly looking all around you for opportunities to accelerate your business.
- Drafting: Just like on the highway where you fall in behind a larger vehicle, drafting as an investor will often place you behind someone moving faster than you, letting them break the wind and allowing you to capitalize on their successes and style.
Again, there is absolutely nothing wrong with this style of management.
Being inquisitive and willing to take chances has helped generate billions of dollars for investors. Choosing this management style requires more of a risk-taker mentality that many find intimidating, but for those who do it well, the rewards are generous. On a recent podcast, industry expert and Rent Perfect President David Pickron cautioned that “when you start chasing after every new idea or way of investing, it’s easy to spread yourself too thin and become distracted.” Having the right tenant is even more critical to this type of investor versus the cruise controller. You are constantly changing directions, and using the proper screening tools to identify your perfect tenant is key because you don’t have the time or focus to deal with the issues that a less-than-ideal tenant is sure to bring.
Of course, there is always a hybrid model of these management styles, but the majority of investors settle into one of these two major categories. Regardless of your management style, knowing and sticking to the fundamentals is critical to your success. Having a consistent set of criteria, a personalized lease, and a way to collect rent easily make life easier for all investors. Using professionals who know the industry inside and out will be some of the best money you spend today, and will save you thousands in the future. Finally, knowing who your renter really is by doing professional background screens will help you avoid the pitfalls of having the wrong person occupying your property. As stated before, having the right “business partner” is paramount for whatever investing strategy you adopt.
Having lots of time for “windshield therapy” and contemplating life for you, my fellow landlords, leads me to the same conclusion every time: We are in the best business in the world, with amazing growth potential. Knowing the type of investor you are helps as you navigate through times like those we’ve been experiencing for the last 18 months. And seeing others’ investment styles can generate ideas for the future, as your investing goals may change over time. Most of all, get out there and enjoy the journey and the adventure that comes with being a real estate investor.
About the author:
Scot Aubrey is vice-president of Rent Perfect, a private investigator, and a fellow landlord who manages short-term rentals. Subscribe to the weekly Rent Perfect podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties.