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  • Writer's pictureSasha Struthers

Landlords Don't Have to Sell Themselves Short

Friday I posted a video on how to deal with disputes that arise, usually in the context of tenant complaints. After doing this video I re-visited an understanding the I have about real estate- what you have is not the end all be all.

A large portion of landlords are mom & pops, who own a modest number of properties/ units. Most landlords also start their real estate ventures in multifamily ie. 2-4 units because the barrier of entry is lower. That being said, most entry level income residential real estate is rent controlled. And rent controlled property is some of the hardest real estate to manage. They say if you can make it here you can make it anywhere.

If you can manage rent controlled multifamily you can pretty much stomach anything. To complicate this, most landlords don't landlord for a living. They have jobs or businesses of their own that are funding their ability to invest in real estate. But often times the real estate itself becomes overwhelming. All the maintenance calls, regulations, accidental violations, complaints, increasing expenses, and little cash flow really saps your energy.

Landlords feel like what the own now is what they are going to own forever. I understand that. Buying real estate isn't easy for most and once you have it you are afraid of letting go and venturing into the unknown. However, many people focus so much on buying the property and forget to figure out what their long term goal is. Are you buying this for cash flow? For equity? Adding value to hold or even sell and trade up? Are you okay with Class C assets or would you rather have Class A assets? If so, what does it take to get there?

This is where I strongly encourage people to have a "exit plan" of sorts. Think about your asset as the business that it is. Real estate is a business and the point of real estate is to earn you money. So if you own real estate look at what you have, how you can maximize it, and what kind of real estate you eventually want. Maximizing focuses on how to make more money (cash for keys, rehabs, additional services, curb appeal, RUBS, better leases, re-development, etc). Maximizing takes money so you want to do your research on the potential return and time horizon for that return such as buying out tenants and rehabbing or even adding an ADU for an additional rental on site.

After you figure out a maximization strategy talk to professionals about what is out there. Talk to your CPA or real estate brokers about how 1031 exchanges work in the event you sell your property and need to trade into something else. Also talk to brokers about what it takes to step into an asset class you prefer.

Mom and pop landlords sell themselves short by feeling defeated by what they have but not looking into their options. Owning real estate is a major accomplishment to be proud of, but you don't have to feel stuck. The first step is getting educated about what you have and then what else is out there.

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The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.


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