Updated January 2, 2019
I am an accidental landlord—“accidental” because I ended up becoming a landlord when the real estate bubble burst in 2006 and a few houses I had purchased (with hopes of renovating and selling for a profit) became unsellable as home prices plummeted. This is how I came to co-own 4 properties (and a vacant lot), and since some of the properties are in a fairly poor section of East Baltimore, which was rapidly improving before the 2006 real estate crash and then abruptly stopped, I have had a real-world education in the challenges of retaining compassion while dealing with people who are either unwilling or unable to meet their obligations as tenants. Experience, it is said, is what you get when you didn’t get what you had hoped for.
There are bad tenants, good tenants, and bad landlords and good landlords. I own one solidly middle-class house in South Baltimore, and despite having been fleeced by building contractors (it was my first major renovation project for a rental property) it has gradually paid itself off and is now close to going from being a net negative to even.
I often read columns by ivy-league educated pundits in the major media and wonder if any of these folks have ever had to actually deal with tenants in a neighborhood that is struggling to hang on. If they do, they will learn something: that they have always taken their own “middle class values” for granted–and that these values are often foreign to people who live close to the edge. (If you are upper class you will never bother with being a landlord in a tough neighborhood—or if you do, you will be like Trump’s son-in-law Jared Kushner—distant from the day-to-day life of the neighborhood and the lives of your tenants. Perhaps you will nonetheless promote a positive environment–and not become a slumlord like Kushner.)
When you buy an old house, you will invariably need to renovate. Regardless of the neighborhood, the cost of labor and materials is consistent. If you put $80,000 into a house you purchased for $60,000 and all the comparable houses in the neighborhood are selling for $60,000, the value of your house will be only what someone is willing to pay for it—probably not much more than $60,000–no matter how lovely the renovation. On the other hand, if you purchase a house for $160,000 and put $100,000 in renovations into it, and the neighborhood homes are averaging $300,000, you are already $40,000 ahead when you complete the renovation.
After a decade of having nearly everything happen that could happen with my rental properties, and learning that I can manage my properties much better than an outside property manager, I have found that from day one you need to establish a strong understanding with your tenants—namely that if they saddle the landlord with a large debt, they will be held accountable. At the same time, you need to decide when there is a legitimate hardship that requires making an exception to your own rules. And you need to treat the tenants as you would like to be treated by taking care of repairs and other quality-of-life issues promptly.
I once worked with a tenant in arrears to try and help her stay in the property. She was the grandmother and caretaker of four children whose mother had lost parental rights due to heroin addiction. The grandmother’s husband, a forklift driver, lost his job, and they became unable to pay rent. When I went to the city’s eviction prevention office, they said they had never seen a landlord work with them before because landlords with tenants in arrears simply want to resolve the situation by evicting the tenants and moving on. Ultimately, this tenant could not pay and stay, despite getting assistance. When the sheriff came to evict her, the tenant put her arm in my arm and said “I know you tried to help me and I appreciate it.” I never pursued payment (the tenant left owing more than $3000).
Now imagine how this might be portrayed by some pro-tenant organizations (and I do not even like the term “pro-tenant” as that implies that if one is not “pro-tenant” one is “anti-tenant.”) The trope would be something like this: “Evil Landlord Evicts Grandmother of Four Children After Husband Loses Job.” Anyone who thinks like this has never actually been a landlord in a poor neighborhood.
What I have learned as a landlord in a poor neighborhood (albeit a neighborhood that has real potential due to its location and affordable, well-built housing), is that ALL the problems of society come to rest on your doorstep. Drug addiction, crime, unequal educational opportunities, and low wages—since nobody else has been able to solve these problems, you, the landlord, are the place where they all come to rest. [Yet another example: Several days after the federal government shut down on December 22 over an impasse on Trump’s border wall funding, the Office of Personnel Management (OPM) posted a letter telling furloughed workers that they should offer to do chores for the landlord if they were unable to pay the rent. OPM later claimed that the letter had been posted by accident.]
I am writing this because today a tenant who has struggled to live in one of my rental properties for a year moved out just ahead of eviction. This tenant works as a CNA at a nursing home—and the employer will not even pay her a living wage—after three years she makes $13.37 an hour. If you know what it costs to have someone in a nursing home, you understand that this is due to a power imbalance, not an inability of the institution to pay a living wage. Further, the tenant’s 29-year-old boyfriend, who is unemployed, moved into the house in violation of the lease, and at some point, the tenant’s mother (also apparently unemployed) as well. This ran up the cost of the water bill, which the tenant then stopped paying. This is not an unusual situation.
Programs to promote home ownership in such neighborhoods are one solution—but there is also a need for small landlords to provide nicely renovated livable homes where people who cannot own can live. It will take a combination of state, federal and private money to turn these neighborhoods around—and when they do improve, it will be critical to set aside affordable housing. In the meantime, absent the input of large scale private or governmental resources, it will be the small landlord with a few properties who remains one of the key, positive elements that keep such neighborhoods viable.