Lessons learned on the journey to real estate investment excellence

By Stuart MacPherson

When my wife Denise and I decided to pursue real estate investment as a way to improve our financial future, we looked for education on what we needed to be successful. Early in our pursuit of knowledge, we realized some of the key elements to success. We learnt that it’s vital to do thorough research into the property you’re thinking on investing in, not to act on a whim, use a company like we buy houses Tampa to sell a property quickly if the market is booming, and how to manage our finances to ensure we could always be looking at other investments. However, one of the most important things we learnt early on was how to manage tenants and properties. I can remember that many of the questions we posed to the real estate ‘gurus’ revolved around whether to self-manage our properties or to hire a professional property manager. As might be expected, the best answer that we heard was, ‘Well – it depends.’ We also heard that we might want to manage at least one property to understand what is involved so that we would be better positioned to work with a professional manager in the future.

The stories that follow are a few of the property management lessons that we have learned as we grew our portfolio.

Property management is really tenant management.

Both Denise and I have some background in customer service, so we understood the importance of finding ways to connect with our customer (the tenant), while at the same time staying true to our principles. Is the way that we want our properties to be managed is basically using -tough love?. We want our tenants to know that we appreciate them and we want them to have the best home possible, but we expect them to live up to their responsibilities and to treat us and the home they are living in with respect. An example of this -tough-love – approach is the fact that we automatically issue Form N4 – Notice To End a Tenancy Early For Non-Payment of Rent on the morning after the rent is due if rent is not paid on time.

For one of our first properties, we decided to self-manage. From checking out the cost to renovate a house to arranging the required supplies, we had a lot of things on our plate that had to be crossed out from the list. Soon after purchase, we started a major renovation project on the property to create a legal secondary unit retro-fit. Trust me when I say that renovations and extensions for property take a ton of work! We had to pore over so many layouts, exterior and interior designs, materials for the unit, good quality Fort Worth Windows Doors, getting reliable contractors for the job, and much, much more. At the time, Denise had retired from full-time employment with the federal government while I still held down a 9 to 5 job, so she was able to regularly travel to the property to oversee the renovations. We completed the renovations and suffered through a few months of vacancy while we clarified the tenant profile that was suitable for this property. Because the property was at a distance, we decided to work with a full time property manager, which made it much easier to show the property.

A like-minded property manager is the best property manager.

We interviewed and hired a property manager who was well established in that community, and who shared our beliefs around managing tenants. It helped that the property manager was also a REIN member so we knew that this person was getting the same training and information that we were getting. We were able to work closely with the property manager and acted as hands-on owners. Whether this made things easier or harder for the manager I’m not sure, but I must admit that we had a very good working relationship with that person and we didn’t once get the impression that we were overstepping our boundaries.

One tenant in the property (who we had inherited when we purchased the property) was a long-term tenant who is still occupying the secondary unit (we had moved him to the main floor during the renovations). Our relationship with the first tenants in the main floor unit were working out until they fell on some financial difficulty, and asked whether we could use their last month’s rent as current rent. When we said no (remember our tough love principle?), the relationship soured and they fell behind in their rent over the next few months. The threat of a hearing before the Landlord – Tenant Board and our offer to end the tenancy to allow them to move to a more affordable location resulted in their leaving (but getting current on past rent), and our leasing to another family who has been with us more than two years now.

An experienced legal professional is your best friend.

The importance of using a professional to support our Property Management became quite clear at another property where our tenant fell behind in rent. When we realized that we would be going before the Landlord Tenant Board (knowing that this file would be special since our tenant held an expired Lease Option Contract on that property), we decided to use the services of a paralegal. The situation worked out to our advantage as the paralegal suggested that we request mediation before a Landlord Tenant Board mediator. The mediation resulted in an agreement with the tenant to pay back all arrears over an acceptable period of time and to ensure that all monthly rent payments were on time. It also ensured that if either payment was in default, we as landlords could request an immediate Notice of Eviction without needing to appear before another hearing. This application of ‘tough love’ corrected all of the problems. In an interesting epilogue to this story, two years later, the tenant inherited a substantial amount of money and made an offer to buy the house from us (at current market value), which we accepted.

In Ontario, the need to use a proper professional when dealing with issues that may go before tribunal has become even more important as a result of an Ontario Superior Court ruling in April 2013. The Court found that a property manager was acting improperly by providing legal services at the Landlord and Tenant Board (LTB) contrary to the Law Society Act. Since paralegal regulation in 2007, only members of the Law Society or those who are legitimately exempt are able to provide legal services. The definition of “legal services” includes a number of common landlord and tenant activities including the drafting of N4’s, L1’s and appearing at the LTB. So while landlords in Ontario can represent themselves or a family member, property management companies can NOT provide legal services by representing the landlord before the LTB. What this means is that, at least in Ontario, if you as landlord are not prepared to appear before the LTB, you need to hire either a lawyer or a paralegal. Luckily, there are a number of qualified paralegals who understand the mysteries of the Landlord Tenant Board. Additionally, if the team has with them software (such as the ones from this website) that could help them hold online depositions and hearings – it might just prove to be an additional bonus for you as you would be able to attend them from anywhere in the world!

Protecting your best interests is crucial.

We still manage some of our properties ourselves, but we decided to have our other acquisitions (particularly those located at a distance from our home) managed by a professional property management service. To find a suitable property manager, we used the tricks and tools we had learned while building the rest of our Power Team.

As with other aspects of building your team, ensuring that you have found the right Property Manager to work with you is critical. Completing your research on potential partners is key, as well as obtaining references from other landlords who have had good results from your potential agent. You will want to ensure that whoever you hire has enough capacity to watch over your interests, and is not overwhelmed with the size of their portfolio – in other words, have they got the horses to pull the wagon that they are hitched to. You will also want to ensure that they are not at risk financially – we have a friend who suffered significantly when the Property Manager responsible for collecting rents on his thirty units defaulted and declared bankruptcy between the time he had collected the rents but before he paid them to our friend.

Probably the biggest lesson that I have learned in the past few years is that a good property manager is worth his or her weight in gold. Those wonderful people who are willing to take on the task of managing properties for the rest of us, and doing it in the way we would want to do it ourselves, are amazing resources. Similar to precious metals, such people are not on every street corner, but they are around, and they are available if you seek them out.

Stuart MacPherson is a recently retired senior civil servant, an accomplished public speaker & trainer, internationally recognized public administration professional, successful entrepreneur, accomplished marketer, devoted family man and active community leader. He currently resides in Ottawa, Ontario with his wife, Denise. Reach them at sdmacproperties@gmail.com.

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