Tenants Are Not Your Customers
by Mike Butler
Recently, I had the pleasure to participate in a national conference for
landlords. During my presentation, I asked the question: “How many landlords
think your tenants are your customers?” The majority of the room raised their
hands. Then I dropped the mental bomb and made the statement “Your tenants are
not customers!” After making this statement, I intentionally paused for a few
seconds to simply observe the reactions in the room.
It was amazing. The expressions on the faces in this room full of landlords
ranged from mostly confusion to one fella who absolutely refused to have an open
mind even after paying a registration fee to attend a learning environment
focused specifically to benefit landlords. This poor fellow reminded me of the
selfish greedy child who has to win at all costs or pick up his ball and go
home. He decided not to play and chose to leave, making a scene, slamming a
chair, and stomping his feet. What an eye-opener to childish behavior on the
part of a self-proclaimed 30 year landlord. (I’d expect this kind of behavior
from some folks who’ve applied to become one of our tenants.) This was
unexpected entertainment for attendees as well.
That’s why we have two ears and one mouth. We learn by absorbing information and
new ideas. What’s the definition of insanity? Doing the same thing over and
over, but expecting different results. I’m guilty of this myself. As investors,
property managers, and landlords, we should understand the legal position of our
role as landlords and the role of tenants. In addition to the legal definition
part, we’re actually running a business. Our objective with our investment
properties is to increase our wealth, cash flow and quality of life. It doesn’t
matter if your business is small or large, it’s still a business.
Business Relationship
Here’s your challenge. From a business relationship standpoint, are your tenants
customers? Seriously, think about it for a moment. Many landlords and experts
say our tenants are our customers. Most retail establishments have slogans “The
customer is always right.” Do you really want to adopt a slogan “Tenants are
always right”? Hmm... did you hesitate a minute here on this one? Can you etch
in stone or really think and believe tenants are always right?
Don’t pull the trigger yet on your mental knee-jerk reaction to these comments.
If you operate a retail store, you’re at the mercy of your customers and the
customer is always right slogan can apply. You must get them in the door to buy.
If you operated a flower shop, would each customer have to fill out an
application and sign an agreement? If you operated a stop and rob food mart,
would your customers have to fill out an application and sign an agreement to
buy beer, smokes, or lottery tickets?
Don’t get me wrong, there are businesses requiring customers to fill out
applications and agreements such as rental car companies, loan companies, credit
cards, and more. The point to understand is the wide range or scope of the word
“customer”. There are cash-paying, no-agreement, always right customers one end
all the way to the other extreme of qualifying customers after an application
process. As far as the business relationship definition, try this on for size.
Tenants are Not Your Customers.
Try this mindset:
Your Tenants are Employees!
Think of them and treat them as highly valued employees. This should be a good
thing. At the national conference mentioned earlier, the landlord who couldn’t
accept this idea of tenants being employees vividly displayed his attitude that
customers are more valuable than employees. Wow! What a horrible boss and
leader.
Thinking of your tenants as your employees may generate a tremendous amount of
very intense and emotional opinions. Your range of reaction to this comment is
based on your experiences of the word “employee”. It’s great! Use it to your
benefit. A very similar concept might be Dr. Stephen Covey’s paradigm shift of
the position or role of boss vs. leader. If you are a boss and follow the
stereotype role of boss as a dictator and the person who simply announces things
to do, we can all grasp the tremendous amount of negative vibes associated with
this kind of behavior.
On the other hand, if the “boss” has behavior more in line with a “leader”, the
boss becomes more of a role model, a positive, respected, and friendly person.
I’m not an expert on all of this stuff, but I’ve attended several courses on
this subject and learned how to put these ideas and concepts into my real estate
business. We can apply many of the same ideas in our world of real estate
investing and dealing with tenants.
Keep an open mind here. Don’t fight or challenge this thought-provoking
brainstorming session. On the surface, I’ll admit tenants are customers because
we provide a product and/or service for a fee and they pay for it; however, how
can you make it better, more profitable, more efficient? Here’s the education
challenge. Instead of the typical landlord-tenant relationship, let’s make a
relationship change to employer and employee. With your tenants becoming your
employees, you become their “leader”. Interesting? Employees should be viewed as
a great asset. Good employees enable your business to be profitable and should
make your life easier, not harder. Try this exercise. Read the following
statements and see if you can substitute the word “tenant” for the word
“employee”.
- You should have a good relationship with good employees.
- Good employees are valuable.
- Exceptional employees should be rewarded for outstanding performance.
- Employees have responsibilities.
- Employees are expected to perform satisfactorily or suffer the consequences for
poor performance.
- An employee who is a bad apple, can ruin the good apples.
- Allowing one employee to remain with poor performance can bring down performance
and attitudes of good employees.
- Not treating all employees the same is not fair.
- Employee appreciation programs promote good performance, loyalty, productivity,
and profit.
- Employee’s length of service should be a guideline of additional benefits to
employees promoting employee retention.
- Outstanding or exceptional community service or personal achievements by
employees or their immediate family members should be recognized.
- Employees with poor performance should be dealt with in a fair, consistent
manner, including termination.
Just like above, substitute the word “property manager” for the word “employer”
and “tenant” for “employee”.
- Employer should be responsive to employees concerns.
- Employer should be a leader, not a boss.
- Employer has responsibilities along with consequences.
Got the idea? This attitude kind of opens a new attitude in dealing with
tenants. Good, effective communication among responsible parties sets the stage
for great results. I assume you really want to have the lifestyle of the
successful real estate investor as played out on the infomercials on late night
TV. Once again, it doesn’t matter if you have one or two investment properties
or hundreds, this paradigm shift of thinking of tenants as highly prized
valuable employees should really get you some long overdue results as seen on
those infomercials.
Don’t keep this focus on tenants only. Spread it around. How about your own
help? Office staff and maintenance staff should be treated as highly valuable
employees. Your furnace person, electrician, plumber, roofer, lawn service
provider, painter, carpet installer, carpenter, and so on. Here is an absolutely
powerful and cheap way to reward your employees. Most investors I know have had
a job or still have a job today. For those of you who are “unemployable”, go
back with me for a moment to the days of punching the clock.
Think of the holiday season. From Thanksgiving to the end of the year, what
happened to those folks (including myself) who have jobs in government or the
corporate world? Holiday parties and more holiday parties were offered for the
unit I worked for along with invitations to holiday parties for all of the other
districts. It was almost a competition atmosphere about who could throw the most
extravagant holiday party. The bragging rights for the best holiday bash usually
went to the police district who had live entertainment, a dance floor, a huge
hall, plenty of food, booze, beer, and even limousines! Sounds great doesn’t it?
Switch gears with me here for a moment. While I worked my full time job as a
police officer and observed all of the free holiday events for me and my wife, I
happened to hit the pause button and reflect on the holiday happenings of those
who are valuable to me in my real estate investments. Remember my furnace
person, electrician, plumber, garage killer, etc.? Most of these folks have mom
and pop operations. (that’s why we use them because they are usually cheaper
than the ones who have the full page ads in the yellow pages) What are they
doing during the holidays and where are they going? Do they get invitations to
any holiday bashes? I guess some do if their spouse has a job somewhere.
Here is what I do every year for my vendors, contractors, resident managers, and
those who are an integral part to my real estate business. For the last several
years I reserve the banquet room at a nice local Mexican restaurant for the
Saturday before Christmas. We mail homemade full page simple invitations to the
8th Annual Vista Holiday Bash from 6pm to 10pm. They can bring their spouse or
significant other. This banquet room also has a very small bar and we include an
open bar as part of this annual holiday event. We’ve never had any issues of
anyone abusing the open bar. In fact, my experience is just the opposite. These
folks are not used to the extravagant holiday bashes and are very, very
appreciative of this event to benefit them for free. In fact, every year they
try to pay the bartender for their drink and are amazed when the bartender
waives his hand and says “no charge”.
The restaurant has a “buffet style” of presenting the food on a portable steam
table. Nothing fancy, pick and choose what you want and how much. From tortilla
chips and hot cheese dip to beans, chicken, beef, and soft flour tortillas along
with several vegetables and sauces. This covers almost every food tastes
including vegetarians making me politically correct again. Good music, fun,
food, and drink set the stage for these folks to network and have a good time. I
usually take the floor around 7pm or so and introduce each and every vendor by
name along with their product or service and a little light hearted humorous
story on each person. This is powerful. I’m fortunate to have a garage killer
who has outrageous stories and he usually grows into the center of attention
before all is over.
These folks come from all backgrounds and dress accordingly. My electrician
starts talking about this annual event in June of each year and said his wife
really looks forward to it, even though she’s not much fun (his words, not
mine). Okay, now the bad news. This annual event cost approximately $600 total.
That’s right, room, food, booze, and tip for the waiter and bartender. Believe
it or not, this is a nice restaurant just two blocks from my office.
The rewards and paybacks can’t be measured. Guess where I am on their list of
valued customers. I’m willing to bet I am probably at the top of their list. I
might not be the biggest, but I am probably one of their best. We’ve had a rash
of horrible storms and tornadoes recently and guess where my tree guy put me on
the list of next in line? I didn’t even have to call him. He called me asking
where to go first! In addition to the great business relationship this kind of
event promotes, it makes me feel like a million bucks to see the wonderful
feeling of appreciation and value of the skills, trades, and workmanship of
these folks. Several vendors told me no one has ever done this before. This is a
great way to let those who make your business successful know that you really
appreciate them, their work, and relationship. Not only doing a good job for
you, they are a walking, talking billboard for your business – by referring
tenants, sellers, loan customers, etc.
Work on this one now and start planning for your own event for this holiday
season. I’d like to hear how your event works for you. Here is a helpful list of
those to consider. Invite your banker(s), furnace person, electrician, plumber,
carpenter, lawn service, resident manager(s), office manager, bookkeeper, CPA,
attorney(s), siding and gutter person, tree service, pest control, roofer,
insurance agent, highly valued real estate agent, auto mechanic, Section 8
inspector(s), helpful service clerk(s) at local hardware store, paint store,
supply house, newspaper for your classified ads, your painter, garage killer,
trash/junk hauler, and the person who lets you place your dumpster in their rear
parking lot for free.
This is just a small list to assist you in identifying those who might be
important links in your strong real estate chain. So remember, good employees
are a good thing and make your life easier and more profitable.
Bio:
Mike is a focused, aggressive real estate investor, who takes pride in avoiding
banks to buy investment property.
Mike realized early on he MUST have a strong foundation to grow quickly and
safely. Mike has reviewed many property management software programs only to
discover they fell short of what he needed. Mike has spent thousands of hours
tweaking and researching Quicken and QuickBooks Pro. His method is getting the
results that he needs.
In May 2002, Mike was invited to be a featured speaker at a regional conference
of CPAs and the rest is history. His simple laid-back street level teaching
style is easy to understand and benefits all levels of investors, from the
beginner to seasoned veteran.
Successful investing utilizing tenant tracking and effective property management
and bookkeeping techniques enabled Mike to retire in March 2000 after 13 years
as a Louisville Police Detective.
He was featured in Money magazine, June 2001, in the article “Can Real Estate
Make You Rich?”. Mike Butler is a Kentucky licensed real estate broker, a
realtor, member of KREE, and a charter member of NARPM.