Should you treat your rental properties as a business?
I have seen lots of debates between landlords of all experience levels. In some of my own circles, there is a debate about treating rentals as business. I can honestly tell you that I have come off a little harsh in these discussions. Unfortunately, my own bad apples have taught us that we have to treat this like a business.
Real estate is defined by rules, laws, and regulations. We learned the hard way that owning houses has to be treated like a business with leases, break out clauses, late fees, etc. If you don’t treat it like a business, nothing pleasant happens! Unfortunately, I had to find this out the hard way. Hopefully my story will teach you how to avoid the same pitfalls I made.
Why I Treat It as a Business
In the beginning, I was lenient. I really wanted to treat others how I wanted to be treated. I was expecting to be treated with respect and understanding. But we had a lot of issues. We had a tenant who gave us 10 days notice that they were moving out three months early. In this case, we only found out because I mentioned renewal. The kicker was we allowed them to move out with no penalty with the understanding that they would leave the house in move-in condition. You know what? They left the house TRASHED!
In another case, a tenant moved out 14 months early. This was a tenant that we scrambled out early for and even left furniture for!
From then on, we learned that this is a business. Tenants will take care of their own interests, and we needed to make sure we took care of our interests. Now don’t get me wrong, I take pride in being a great landlord and treating others with kindness. I just expect our contract and rules to be enforced. I have a 14-page lease that we enforce.
We go over the lease in detail with the tenants. We spend between 30 minutes to 1.5 hours going over it. The lease is blank, allowing the tenants to fill it out in their handwriting. At the end of the lease review, there are no questions or confusion. Therefore, when questions or concerns come up, we have a DETAILED agreement to refer to. This has allowed us to make it about business and not friendships.
Honestly, this has been my biggest secret. I am not the bad guy, but there is no “Let’s discuss it” or even questions about issues. It is simply the lease and agreement that everyone has already agreed to!
You are the guardian to you and your family’s interests. Your lease is your best defense and offense on your way to rental success. Your money is involved, so you should treat your rental as a business.
Do you operate your rentals as a business?1