Education over Arguments
Recently, I was strolling through the wonderful world of social media and I came across a post that claimed that “landlords are parasites.” Of course, this is a brief paraphrase of a long rant that claimed that landlords are the source of the housing shortage and investing in property should be punished because you’re taking away from people who want to buy property for themselves. As investors, you might find yourself confronting this issue and the best way to address the person is to help educate them, not attack them as they have attacked you.
"Investors are taking all the properties from families who want to live there"
I can see the frustration people are having with market values of single family houses skyrocketing over the past couple years. It is easy to point fingers are multimillion dollar conglomerates or landlords that are putting their money to work for them. But, let’s look at some numbers here. According to the Census Bureau, rentals make up 29.3% of the market. That means 71.7% of homes are owned by families that live in these homes. And, of that 29.3%, 72.5% are owned by investors with up to four units, with the 94.5% owning just one extra unit. This strongly goes against investors being the hoarders.
Another thing to note, when we started our hunt for an investment property, we were looking at distressed properties. The one we found was not from a landlord that had provided a poor quality of life for tenants. It was the owner who destroyed it and brought down property values around them. And, the biggest point to highlight is who I competed against to win the bid acceptance. We offered below asking. Do you know who we beat? No one. No one wanted the property. We didn’t take away anyone’s hopes and dreams of owning a home.
"You didnt build the property, construction workers did"
Technically, this is correct. But, I also didn’t hunt for my own food, refine my own gasoline, or do any other specialized job. We are a specialized society and we have succeeded this far by specializing in a craft and focusing on that one aspect. Now, back to the house. I may not have constructed the property, but I used my money to rehab the property to make it livable. And, in doing so, I provided employment to 10 companies. I hired a general contractor to manage the work, a plumber, HVAC specialist, kitchen remodeler, drywaller, painter, paver, landscaper, flooring installer, and an electrician. These companies get lots of business from home remodelers, and they benefit from large jobs on an economy of scale.
"You buy a property then turn around and charge more in rent than your mortgage"
I think this is a huge misconception. Very seldom are you able to buy a property at market value in this market with the ability to rent out as is. To make the numbers work, you would most likely need to find a property that is distressed to bring it back up to a livable condition to rent. There are some turnkey rental properties, but not many, especially to meet an investor’s Return on Investment requirements. During the Recession, you could find foreclosures or homes that were selling for low costs compared to the market rents. Unfortunately, or fortunately, those times are over.
"Your investment benefits no one but yourself"
I’m going to throw something out there that is not necessarily popular. Being a landlord is a service industry. Tell me the difference between renting a house on a lease versus a hotel, AirBnB, or any other kind of rental? The only difference is the furnishing. You can stay at short term rentals for over a month and you can have an apartment month to month. You are the landlord providing a service to renters. The landlord handles repairs, capital expenses, and has to still pay when there is a vacancy. A hotel also has to do this, but we label that as a hospitality industry.
The argument I came across implied that all renters want to be homeowners, but they are unable to because of the market. I strongly disagree. I have renters in my previous residence that sold their house, downsized, and decided to rent my property. The funny thing is they make more than I do, but they wanted less hassle, plus they were skeptical about the market. Landlords are taking the risk that the market will stay up, the house wont create hassles through maintenance and capital repairs.
Lack of Education is the Source of the Problem
I realized that having a conversation with this friend of mine was really addressing a lack of education. To no surprise, he’s still confident that his plan to make investment properties illegal is the best way to go. I tried to explain Opportunity Zones and why the government finds them necessary as well, but it was falling on deaf ears. Yes, there are some bad landlords out there, but mom and pop landlords (those with less than four units) tend to provide a quality service to their tenants because they know their asset is someone’s home.
Disclaimer
Once again, I am not a financial advisor. These tips are some things I have validated with my own personal experiences. If you feel you need more personal advice, please consult a professional financial advisor. Dont forget to check out the Book List for published authors on this topic!
