Welcome to the April 2021 edition of Owner’s Corner. We have a few new owners joined us recently, so I want to go over why I do "Owner's Corner." One reason is since I am in the business, I get information or perspective that you may not get. I am here to simply share. The second reason is after the initial onboarding, sometimes I don't get a chance to talk to owners when things are going well. While that’s a good thing, I want to be in touch with all the owners. This will not necessarily replace "talking" with the owners, but this is one small way I try to keep in touch with the owners.
In this edition, I want to talk about 3 things.
- Appreciation
- Legislation
- Repairs
Let’s dive into the appreciation. When you receive the owner draw, what do you do? Do you check to make sure that you are getting what you are supposed to get and just move on? Do you get excited? Do you get upset that it’s so little? Or you don’t even notice that you got an owner draw? Whatever is that you do, I’m not here to tell you what to do but to just share one perspective.
If you think about it, the only reason you get the owner draw is that some total strangers (tenants) that you never met are somehow earning money, and giving 20%, 30%, or even 40% of take-home pay to you month after month. Of course, you deserve to get paid as you are providing housing, but I think that owner draw is a reminder that someone out there is earning money for you month after month. At least that’s how I feel when I get my owner draw from my property management companies, and it is a good reminder to appreciate the tenants.
Next is legislation. As always, this is a complicated topic, so if you want to dive in, please do your research and/or talk to an appropriate professional. I am not here to give you legal advice or tell you what to do. Just sharing my view as an individual.
Whether you like it or not, a rent control bill seems to come up every year. By the way, when I say “rent control bill,” it does NOT mean that passing the bill will mean we will have rent control in Lake County. It just means that once the bill passes, Lake County (and maybe other local governments) could control the rent if it chooses to do so.
While there are a lot of rules already in place when it comes to rental properties, most of them, if not all, do not affect us day to day or month to month. For example, we have to keep the security deposit in a separate trust/escrow account from where we receive rents. This requires a little bit of coordination initially (get paid rent in one check and another check for a security deposit,) it won’t affect us daily or monthly. Once they are in place, there’s no extra work on our end.
But what if there’s rent control? What if you are charging $1,000 for rent, but the rent control says you can only charge $900? That means you will always short $100 month after month. To me, I can live with something that will affect us once, short term, or under special circumstances, but I certainly don’t want something that will affect us negatively long term.
Finally, I want to talk about repairs and improvements. Just like you, I am an owner of rental properties, and I do hire property managers for some of my rentals. Just like you, I get a report, and sometimes there is an expense. Maybe for $100, $200 or even $300. Most of the time, I quickly look at the numbers, and if I feel they are reasonable, I just move on.
But there comes a day when you just can not move on. Recently I was told that there’s a water issue in this basement. I know how hard it is sometimes to fix a water issue without spending a lot of money. The property management company tried different things with no luck. I suggested installing a drain tile. The property management company agreed and sent me a quote. $9,450!!! On one hand, it’s shocking how expensive it is, but on the other hand, I know fixing it is the right thing to do. Currently, I am waiting for another quote or two, and I will more likely get this taking care of.
While thankfully it’s not every day that you have to pay $10,000, it could very well happen, so make sure you have some reserve in your account.
Thank you for reading this month's Owner's Corner.
