Ep. #13 - Avoid Becoming A DIY Landlord

… and Landlord! Rental Real Estate Investing Podcast – ​Ep. #13 | Avoid Becoming A DIY Landlord!

So in the Summer of 2016, around the time I was working on my 4th rental property, I went out and bought a very nice Ford F-150 and organized all my tools on the truck so that I could handle just about any household maintenance or repair task that could come up. The truck, the tools and YouTube was all I needed to take on any handyman challenge, and it didn’t hurt that I’m a pretty handy guy to begin with. So we’ve all heard the staying, “If you want something done right, do it yourself” – and I was headed full speed down that path of becoming a “Do It Yourself” Landlord… You should avoid that!

Intro…

Welcome to Ep. #13 | Avoid Becoming a DIY (Do It Yourself) Landlord

Now that I’ve started off speaking about buying my truck, let me go on a brief tangent… I had needed a truck anyway, plus I wanted to advertise my business on the truck, as somehow wrapped cars or magnetic signs on cars just don’t look as appropriate as on a truck. But advertising my business is perfect on the truck, especially a blue truck advertising a business named Blue Chariot. You’d think I named Blue Chariot after my truck, but that’s not actually the case even though it fits perfectly.

With that connection it just made sense that my truck should be blue. Otherwise, as with almost every other vehicle I’ve owned, if not for that association with Blue Chariot, my truck would certainly be black, gray or white. But for this singular reason, this is the only blue vehicle I’ve ever owned. It’s a 2013 Ford F-150, as I’ve not bought a new vehicle since my red 1990 Geo Storm back when I was 18. So don’t buy new vehicles. Instead, get a late module used vehicle that’s fully equipped and has every accessory that is known to that vehicle with low mileage. And speak with a CPA before making a vehicle purchase for your business to find out how best to proceed in making it a tax advantaged purchase. My truck essentially ended up being almost free to me.

But now back to the subject at hand… Avoid Becoming a “Do It Yourself” Landlord. With my truck in place and tools on-board, I started out doing work myself on each newly acquired property… number 5, 6 and 7. And I also quickly found myself showing up at occupied units whenever a tenant reported a leak under the sink or a garbage disposal jam. But I shocked myself out of the DIY phase in a “what the hell are you doing” moment, of finding myself using an auger to clear a toilet clog. It was the last time I did any such task at a rental unit.

Shortly after that event, one Friday afternoon another tenant reported their toilet would not stop running, and thankfully for me, they also reported water leaking from the base of the toilet where it meets the floor and a loose tub faucet. If they had only reported that the toilet would not stop running, I could have easily fixed that on my own, and so no doubt I would have stopped by the following Monday morning to handle it myself. I tended to do work on weekday mornings most often, and the tenant would be at work, so I could complete the task at hand without the tenant standing over my shoulder.

But in this case, because they had also reported a leak from the toilet, I didn’t want it to wait until Monday to stop by. And I had previously cracked a toilet by tightening it too much, so I started searching for a plumber and came across Jordan Plumbing owned by a Mr. Jeffrey Jordan. He came by the next morning, met me at the property and fixed all 3 issues – only charging me for two. Yes, it was more expensive than if I had handled it myself, but it was nice to have avoided the need to do so.

A couple of months later, I was on a cruise (walking through the streets of Old San Juan Puerto Rico) when the same tenant called to report another plumbing issue (unrelated to the prior issues), so I gave the tenant the number for Jordan Plumbing and said to call them to schedule a service visit. Mr. Jordan’s office manager called me back like 30 minutes later, as I was still walking through the streets of San Juan before going back to the ship – as they wanted to confirm that I wanted them to come out and handle the service on behalf of the tenant. I told them to please handle whatever was at issue, but I would not be able to pay them until I return home a week later. Despite that, they did the work and when I returned I paid the bill just as I said I would.

But I was now hooked on being able to have things done on my behalf when I was unable (or unwilling) to do so myself. And had I not used this plumber’s services previously (having met him face to face), its possible that he may not have been willing to do work for me based upon a promise to pay a week later. This event of being able to get a tenant issue handled the same day while I’m more than 1,400 miles (over water) away from home – changed my entire outlook on being a “Do It Myself” Landlord. I started purposely building my team immediately upon coming home from that cruise.

A critical member of my team is still Jordan Plumbing, who now has my AMEX card on file and is able to do work for me as needed, and then just charge it to my card on file. I’ve also updated my lease to make it clear that I am NOT responsible for any tenant caused or influenced plumbing issues. So now short of a burst pipe or roots in the line, I charge just about all plumbing bills back to the tenant (within reason – I try not to be to harsh on that). And they sign off on this handling more than once in my lease to avoid any claim to the contrary. It is also now covered in my lease that tenants must be available to schedule and meet with all vendors (like Jordan Plumbing) to allow them entry and access as needed to handle the task. And missing a scheduled appointment incurs a rescheduling fee. This frees me from having to meet the vendor at the property as before.

For years since then, Jordan Plumbing (and other vendors) have handled most of the tasks on my behalf that I previously had to setup and handle myself as a DIY Landlord. In addition to my plumber, I have two HVAC vendors (one is an individual and the other a company). I have two handymen on-call who between the two of them can handle just about any household task. I also have a person for landscaping and lawn-care, an electrician, 3 general contractors – and several other special purpose vendors and individuals. I’ve got someone for flooring, and counters, and shower tile and backsplashes, fireplaces, decks, vents, doors, and more – you name it.

At this point with the size and qualify of my team, I rarely need to do anything myself, although the DIY habits are hard to break once you’ve started down that path, so I still occasionally choose to handle a thing or two myself. Most often it is for newly acquired properties (I don’t remember the last time I did work at an occupied property other than conducting inspections). But for new and vacant properties, I occasionally still prefer to handle certain things myself. For example, I like putting up blinds, while listening to some audio book. Its fun, keeps me mobile and provides a little exercise. Plus, I can knock out an entire house of blinds in under 3 hours; where it often seems to take others twice as long and its not always with the same quality of install that’s up to my standards.

But because I both enjoy installing blinds and I’m pretty good at it, I have taken this onto myself most of the time. And while I still take on certain additional tasks for newly acquired and vacant properties (because I can and enjoy doing so), once a tenant is present, I’ve build my team to get myself out of the DIY Landlord model. And even for the vacant properties, I still limit my tasks to those I actually WANT to do – and all else is outsourced now to a team member.

Do you really want to be the Landlord clearing toilet clogs? Yes, I know you don’t want to be paying something like $300 for a plumber to clear a toilet clog, but this is an easily manageable situation. First, whenever I do need the services of a plumber, I’m paying on my AMEX card, which (from this and all other activity) racks up enough points that all my travels have been FREE going back years. And with a few changes to your lease and some tenant training – you can make it clear to your tenant that THEY are responsible for handling their own toilet clogs (in my case after the first 2 weeks of occupancy).

So you lay out in your lease exactly what is expected of the tenant for handling certain matters of maintenance and repair on their own – whether it be something they do themselves or they hire someone and pay them directly for handling it on their behalf. But the important thing to communicate, to make it very clear, that every repair and maintenance action is NOT my sole responsibility (your responsibility) as the Landlord to handle on the tenant’s behalf. If they want or expect that, then they should not rent one of my single family homes. Instead, they should rent within a larger apartment complex with on-site maintenance staff. Maybe in that scenario they can call for someone to replace a blown light-bulb on their behalf – but in a single family house, I can’t be expected to run all over town for every little thing. Nor can I be expected to send someone out at a cost of like $30 to me, when all that was needed for example – was to turn a screw a few times to stop a toilet from running. You have to make it absolutely crystal clear to the tenant they THEY are responsible for handling their own toilet clogs and other items of minor maintenance and repair. And at the same time you provide details on how to avoid such issues to begin with. I even provide a high-quality plunger in a nice enclosure with each rental now. So that they can easily handle any toilet clogs on their own with the plunger that I left for them. I also make it clear that NOTHING goes into the toilet other than body waste and toilet paper. And even the amount of paper used per flush needs to be limited. And also, there is no such thing as a “flushable wipe” – that’s just some marketing BS.

And when despite these efforts a plumbing concern is still reported, I remind that we do not cover tenant caused plumbing faults, so the issue is likely best self-handled. But I add that I’m happy to put the tenant in touch with my plumber and they can schedule a time for him to come out. But they will be billed for the service call in full unless if determined in the plumber’s sole opinion the issue was not due to any tenant cause. As such, most tenant’s choose to handle the matter on their own. But those who do still seek to have my plumber come out, most of the cases get billed back to the tenant – and they pay with the following month’s rent. Or in a few cases, if it was a non-tenant caused fault then we will cover it in full, because that then is our responsibility to make sure everything works properly in the home. But the most important thing is that this handling has kept me away from tenant toilets for years – which is well worth every penny I’ve paid to a plumber.

And then even when I do have to pay for repairs, I just divide my total repair expenses for a given property by 12 to come up with an approximate monthly cost. And if it’s reasonable to do so based upon current market rents for a location, this will be the partial basis for the needed rent increase at lease renewal. Therefore a lower (or no) rent increase becomes the reward for tenants who either handled their own repairs (as stipulated in the lease) or who took great care of the home so as not to require repairs in the first place. And then the tenant who breaks and damages things all the time ends up paying for it one way or the other. They either pay directly or indirectly – but either way, they do pay for it. Now this may sound harsh, but beyond normal wear-and-tear and maintenance that all homes needs – most issues are the result of how the home is treated by the tenant. And like I said before, if they wanted everything to be handled by the Landlord, then apartment life is the way to go where there’s on site maintenance staff. But the benefits of living in a single family home, even if its a Townhouse or Condo, has certain responsibilities that come along with those benefits. Namely, that you are in part responsible for maintaining the home and there’s certain repair and maintenance tasks that your’re going to have to do on your own.

I’m not running all over town every time the slightest little thing happens, nor am I paying somebody $25, $30, $40, $50 – just to come out and tighten a loose screw. Or swap out a light-bulb, or any of the things that you could reasonably handle on your own.

A perfect example is a home I rehabbed prior to tenant occupancy, including a complete servicing of all pipes and plumbing and a new sewer pump (as this property was below street level, so the waste has to be pumped up to the street). It ended up with a very expensive plumbing bill resulting from over 25 pounds of grease needing to be cleaned out of the pipes and sewer pump. I’m certainly not handling that myself, nor should I have to pay for it, when it was the tenant who poured hot grease down her sink – apparently not realizing that hot grease cools and solidifies. You need a plumber on your team so that this sort of thing never becomes your task to handle, and language in your lease so that it is clear who pays in such cases.

But not just plumbing… Post occupancy, you don’t want to be DIY Landlording anything. Sure, if you’re like me you like to do a little work (hopefully very little) during the rehab or make-ready phase of a newly acquired or newly vacant property. But once you have a tenant in place – I’ve got tenants who have not seen me through multiple visits by other members of my team. And if not for inspections, they wouldn’t have seen me in years. And I’m training someone to handle inspections for me as well.

I will soon get to the point where I am not seen at all. Eventually I wont be handling showings, lease signings or other tenant on-boarding actions. I already don’t handle any maintenance or repair tasks. And I soon won’t need to handle inspections either. I will be completely ghost in the entire process, which will allow me to replicate the system and have rental properties in multiple markets – for which my goal is to operate in at lease 3, but not more than 6 markets.

But right now my properties are all within a 20 minute drive, so I initially got pulled into the “Do It Yourself” Landlord trap. Thankfully I caught myself before getting pulled in too deep. I only cleared one toilet clog before I wondered out-loud, what the hell was I doing. Sure, “if you want something done right, do it yourself” – but clearing toilet clogs? Was that really something I should be doing myself because no one else would do it right? Was that really the best use of my time? It certainly wasn’t something I enjoyed doing – so why was I doing it!?

When you get a chance, lookup Pareto’s Principle (aka “The 80/20 Rule”). It’s a principle that suggests 80% of your results will come from 20% of your actions. I first heard this concept when listening to another Podcast, and I’ve since encountered it in many times. And then I’ve read books like The 4-Hour Workweek and The One Thing, that taught me my time is best spent identifying and focusing on that 20% from which the 80% of my results will come. And for the life of me, I cannot think of what positive result comes from me clearing toilet clogs – so I will NEVER do so again. Nor will I be painting, or staining decks or replacing rotted wood on decks or patching holes in drywall. You name it, if the property is occupied, I will have someone else do that work on my behalf. And if vacant, I will only do those tasks that I am very good at, enjoy doing and get a little exercise in the process – like putting up blinds. I’ve also been known to replace kitchen and bath faucets or install a dishwasher – because I can easily do so, and because it just seems wrong to pay someone something like $179 to do something like install a dishwasher, which I can do myself in like 45 minutes – while listening to an audio book that I would likely be listening to anyway.

But if the dishwasher in an occupied rental and it has an issue, I’ll just call the plumber and have them handle it. Or, most of my appliances are still under warranty, so depending on the exact issue, I may call the manufacture to put in a warranty repair request, and then have the tenant call the actual service provider to schedule the repair visit – so that I’m not in the middle of any of that.

Now an extension of the 80/20 Rule as it relates to the statement “if you want something done right, do it yourself” – is that if you can get someone else to do the job 80% as well as you would have done it yourself, then its worth that 20% shortfall from your own perfection to free your time to be perfect on a greater task. Can you pay someone $25/hr to handle something on your behalf while you go out to do something that earns $250/hr? Or would you be willing to pay someone $50/hr to free your time to pursue $500, or $5,000 – or $50,000!?

As you grow your number of properties and seek to expand into other markets outside of your back yard, you must remove yourself from tasks that someone else can easily handle on your behalf. But with that said, I’m glad to have done certain things myself at lease initially, because now I know what is involved and how long it should take. So now if someone tells me it took them 12 hours to install blinds, I can ask “why did it take you 4 times as long as I could have done the same thing myself? Which I have done in a quarter of that time – multiple times!” – Knowing what’s involved in a task and approximately how long it should take is a good piece of information to possess.

One of the best things about removing myself from the DIY Landlord role, is that I’m perceived by my tenants as a real business person. I think it would have been hard for a tenant to take me seriously if they had just seen me working on their toilet. But knowing that we have real maintenance people who are going to come out and take action upon a reported issue helps to keep everything professional. For example, I require all communication to be in written form (email / ticket or occasionally a text message). The tenant knows that my maintenance person cannot speak on my behalf outside of the scope of the work order that they are there to handle. And if they are having 2 issues that need action, they need to open two tickets so that two separate work orders can be created. Even if the maintenance person is at their home when they report something else, my maintenance person will tell them they need to open a second ticket about that second matter.

But if I were to show up myself, they would expect to be able to engage me in all sorts of off topic discussions unrelated to the reported matter for which I came to address. And knowing that I’m the Landlord, they would expect any conversation with me to be “official”. And now I have no record of this conversation that took place, and I don’t know who said what 6 months from now. I’m not going to remember that conversation. So I make everything a matter of written record. And I try to show up as little as possible, but even when I am in person, I let them know…  Hey, anything you talk to me about, you’re going to have to open a ticket about it anyway, so you might as well just go ahead and open the ticket to begin with. That extra separation makes it easier to keep things professional, as I know the plumber cannot give them permission to paint a room – and if they wish to make that request of me, it must be done in a ticket. They can’t just see me and like “Oh, I had wanted to ask you something… ” – No! And something about that extra step just seems to make most requests go away (or in other words – to never be made at all). My volume of requests and tasks went down significantly when I stopped showing up… Out of sight, out of mind.

But when I made myself available in person – it was one thing after another. Something about seeing me in person makes everything you can imagine come to mind to ask. But the best part about me as the Landlord not being there in person is that the tenant seems to be themselves when the maintenance person shows up or when the plumber stops by. But when I’m there, I get their fake representative. If they have someone living in the home, like a new boyfriend – they make no attempt to hide it from my plumber. If they smoke cigarettes (or other substances), they will do it right in front of my lawn-care person or my handyman… Never realizing that I direct these representatives of my business to specifically look and check for certain things on my behalf – whenever they’re at one of my properties doing work. And I’ll wait a reasonable amount of time before sending the lease violation notice that came from the report I got from that person. Whether it be the plumber or the HVAC person or whoever it was at the property on my behalf. But if I had shown up myself to handle whatever the issue was, the violation (the problem behavior) would have certainly been hidden from me. Because I wouldn’t see the real behavior, because as the Landlord I only get the fake representative.

Well, as usual, I could go on and on, but I’ll cut it here as I think you get the point. So if you’re a Landlord and you want something done right, hire someone to do it on your behalf; and spend your time finding more properties. Don’t get pulled into the DIY (Do It Yourself) Landlord trap, as it will limit the growth and success of your business. Don’t be afraid to pay a professional or somehow experienced in a task to handle certain matters on your behalf. And then whenever possible, pay them with a points credit card, so that you get not only the tax deduct-ability of the business expense, but also the points and resulting free travel that can be generated from it. And I’ll have a future episode on what many call Credit Card Hacking or Travel Hacking.

And also don’t be afraid to pay a bonus here and there to a service professional who has really gone above and beyond for you. When you call your plumber and he fits you into his already fully booked schedule that day. Make sure that you recognize that type of treatment and do likewise. And refer those people out. Don’t think that if you refer them out to others that they then won’t be available for you. if that’s the case, they probably weren’t going to be the best long-term vendor for you in the first place. Because I know that the vendors that I work with, they appreciate the fact that I refer them out. When I call and I have an issue, it really doesn’t matter if their schedule is full, they’re going to work me in. If not that day, then the very first of the next day.

So again, your time as a Landlord is best spent analyzing deals, making offers and securing funds to buy more properties… If instead you’re working on toilets, wash your hands, then slap yourself in the face – because you need to snap yourself out of the DIY Landlord trap your in.

And don’t forget, that if you have properties are in the Raleigh / Durham area of North Carolina, you can hire me and Blue Chariot Management to handle everything on your behalf – because I know the team I’ve built here in the Triangle area of North Carolina has everything covered.

Outro…

Disclaimer…