Wealth Through Real Estate - Are you cut out to be a landlord?

The wealthiest 1 percent of Americans invest in real estate for the long term. In our October column, we said that the cheapest way for anyone to pay for this property is to become a landlord. We explained some financial projections you must calculate to decide whether to buy a particular investment property. This time, we’ll look at whether you’re landlord material. It takes a particular mind-set to be a landlord.

The Word “Landlord”
Most of us have negative images of landlords. For some, the word conjures up the awful tenement owners on New York City’s Lower East Side who were exposed by the great muckraking journalist Jacob Riis in 1887 in his book How the Other Half Lives.

But is this the typical landlord? According to the Small Property Owners of America, little guy landlords provide 75 percent of all rental housing in this country. They’re everyday people. They include minority families for whom owning property has brought prosperity, like Joann Garner, a Black New Yorker who now lives in Winter Garden, Fla., with her husband. The Garners own nine properties in Brooklyn, N.Y., Pennsylvania and Florida. Joann, a strong Christian, came up poor in a Harlem tenement. “I know what it’s like to not have the best, so I don’t care how beat down it is. I’ll even fight my husband if he doesn’t want to fix up a rental house the way I think it should be,” she promises. You, too, can be a fair, responsible landlord.

Remember that you’re first an investor who just happens to do landlording.

On the other hand, owning rental property is a hands-on job, stresses Bob Gore, a Brooklynite with five properties in Buffalo, N.Y., and Chicago. Gore, a tornado of activity who not only runs Bob Gore Photography but is also the chairman of the trustees at Abyssinian Baptist Church, nevertheless disdains using property managers. “You’ve got to be on the scene. Managers will take you, tenants will take you and the tradesmen will take you.”

But Gore says that doesn’t mean you have to live next to your renters. He grew up in the same buildings with his dad’s tenants and didn’t like the experience. “If your toilet is broken, I want to see you tomorrow, not tonight,” he jokes. Are you good with a plunger at three in the morning? You may have to be if you live close to your properties.

Remember You’re an Investor
It is important to remember that you’re first an investor who just happens to do landlording as one of your investment strategies. Successful investors own their properties free and clear. That reduces debt and lets them build equity faster. That should be your goal as a landlord.

Several landlords told me it’s absolutely necessary to get familiar with the many regulations that will govern you. For instance, Shaun Covington, president of Covington Realty, who owns 175 apartment units in Harlem and manages another 175, emphasizes that you must know the stringent Rent Stabilization Code that protects tenants and caps landlords’ incomes.

How can you ever learn all this stuff? Either you’ll need to hire experts (an attorney, a property management company) who already know the rules, or you’ll need to spend time becoming acquainted with them. If it sounds daunting, just remember that there have never been more resources available to landlords.

Get Help Learning the Ropes
Covington recommends taking free seminars on residential property management at the City of New York Department of Housing Preservation and Development (212-863-8830; www.ci.nyc.ny.us/html/hpd/home.html). For instance, HPD recently held a seminar to teach property owners about low-interest loans and offered individual counseling. HPD also awards certificates to owners or potential owners of multifamily residential property. The courses run from six to 72 hours. Or you could enroll in a registered apartment management course at a community college.

Ed Coleman, who owns 80 units in Queens and Brooklyn, strongly recommends joining the Small Property Owners of New York (212-410-4600; www.spony.org). The association holds free meetings and lectures every other month at the 92nd Street Y in Manhattan. Annual dues are $70. Coleman, the group’s executive vice president, also advocates joining the Rent Stabilization Association and the Community Housing Improvement Program in Manhattan. CHIP sends members a monthly newsletter with tips on property management, and it has a Web site with lists of vendors that can help you in your business. You can also attend the home owners’ shows that frequently visit the Javits Convention Center and New Jersey.

Go to these venues, ask questions and hear what real landlords say about their business. Find out what you’re in for before deciding you want to be a landlord.

Tony Chapelle can be reached at TonyChapelle@hotmail.com, or
212-534-7195.