Penny Wise and Pound Foolish
December 1, 2005
What does it take to be a landlord? All it really takes is ownership of a piece of investment real estate. What does it take to do it right? Primarily it is to think of yourself as actually having a business. Many landlords who own few units often do not think of themselves as being in business, but rather just “having a rental.” Since housing is one of the most regulated, if not the most regulated, industry in the nation, thinking of yourself as “just having a rental” can be dangerous.
I received an email question from a tenant. I do not respond to tenant emails, since they have plenty of free resources from assorted landlord haters who are glad to grind their axes. This question is worth passing along to landlords, though, because of the point it makes about thinking of ourselves as being in business.
My landlord installed a brand new heating and AC unit outside the home this past summer. Well it worked just fine this summer running the AC. Now this winter we cannot use the unit because it was never inspected by the city! The gas cannot be turned on and we have no heat! Is there anything we can do legally??
The owner of this property is required to provide the ability to have heat under the landlord-tenant law of every state. A typical clause in the landlord-tenant law is the landlord is required to provide “Adequate heating facilities which conform to applicable law at the time of installation and maintained in good working order.”
No doubt this landlord was trying to save money by doing the installation himself or having it done without a permit by an unlicensed contractor. This situation hearkens back to the August 2005 column, “The Unlicensed Disaster.” In that column I warned: “Imagine explaining to the judge how you were trying to save money by using someone who was ‘not qualified’ to do work on any property. The state and the courts assume that anyone who is not licensed is not qualified.”
Apparently the landlord did not realize the gas company will not turn on the gas to a heating unit that has not been inspected and passed by the city. Natural gas is dangerous and not to be dealt with lightly. It can cause an explosion, and its fumes can kill. There is no way a gas company will hook up to a unit that it isn’t sure is installed properly.
Penny wise and pound foolish, now this landlord is in for a huge surprise. What happens when he asks for the inspection? Will the city make him take out a permit for the installation before it can be inspected? More than likely. Could the installation have been done improperly and need to be redone by a licensed contractor? Maybe. The money the landlord saved by doing it himself, not taking out a permit, or having an unlicensed contractor do it is gone and it will probably cost him even more than if he had done it right the first time.
Then there is the tenant. The tenant is entitled to a “habitable” place to live. Part of that this time of year is heat that works. Depending on the state, this tenant might be entitled to move, at the landlord’s expense, to a motel or hotel until there is heat in the unit. More expense for the landlord.
All that aside, our tenants are our customers. We need to think of our customers right after we think about protecting our investments. Doing it right as a landlord involves good customer service, just as if we owned our own retail store.
Some people are just shouldn’t be landlords. Those who are always trying to cut corners at the expense of their properties and tenants fall squarely into that category. They would do better in mutual funds. We are running a business even if we think otherwise. Failure to treat it as such will doom us to eternal grief.
About the Author: Bob Cain
Some 30 years ago Bob Cain went to a no-money-down seminar and got the notion that owning rental property would be just the best idea there is for making money. He bought some. Trouble was, what he learned at the seminar didn’t tell him how to make money on his rental property. He went looking for help in the form of a magazine or newsletter about the business. He couldn't find any.
Always ready to jump at a great idea, he decided he could put his speaking and writing skills to work and perform a valuable service for other investors who needed more information about property management. So Bob ferreted out the secrets, tricks and techniques of property management wherever he found them; then he passed them along to other landlords.
For over 25 years now, Bob has been publishing information, giving speeches, putting on seminars and workshops, and consulting for landlords on how to buy, rent and manage property more effectively.