HMW #148: 3 Red Flags You Might Be a Slumlord

Read Time: 6.5 minutes

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Sometimes, I tell people the following:

• I've bought and managed dozens of $30,000 homes that rent for $600 a month
• I have a 350+ door portfolio across personal deals and with partners
• I own property in a neighborhood well-known for crime
• I've evicted non-paying tenants of all types

And the response is often, "Damn, Alan, you are a slumlord!"

Ok, ok, so you are one of those people too. I knew it. But I'll let it slide. You are just misinformed.

Let me ask you a few questions first:

• Can you only be successful at real estate if you take advantage of someone?
• Does the price point of a house determine if you are an ethical landlord?
• Does charging any amount for rent on an open market make you evil?

If you answer "Yes" to any of those, then you don't fully understand real estate and I won't win you over. 

But if you are unsure of the answers, don't worry. I'm here to break down 3 things that DO make someone a slumlord so you can steer clear of them (and don't become one yourself).

Great you are open to listening! That's all I can ask.

Red Flag 1: Your property is unsafe for tenants

A classic slumlord is someone with deferred maintaince on the property, who ignores calls for safety hazard repairs, or overall puts people (both tenants and non-tenants) in harm's way.

Do you have flaking lead paint and rent to a family with young children? Do you not disclose toxic chemicals in the soil? Do you not worry about the cracking foundation that has compromised the integrity of the house?

If your property can or eventually will harm a tenant, neighbor, vendor, delivery person, or even a pet, you are most likely operating as a slum lord and need to change your ways.

Good thinking, but you can't insure your way out of being a slumlord. You must actively prevent accidents, not just wait for them to eventually happen.

Red Flag 2: You only operate in cash

Buying a property in cash is one thing. But if you only collect rent in cash you are probably doing that to avoid paper trails. And what kind of person would want to avoid a paper trail?

• Someone trying not to report their income to the IRS
• Someone who doesn't want their tenant to be able to prove their payments

This makes for an uncomfortable power dynamic between landlord and tenant and makes it ripe for a landlord to intimidate or take advantage. In all cash transactions, a tenant can't prove their history of payment, dates of payments, or amounts.

With this arrangement, an unscrupulous landlord could operate without leases and raise rent, evict, or report legit tenants as squatters at anytime that suits the owner. 

And of course these bad apples may sully the reputation of all the other good landlords in the world.

That's the right idea! Even with Bitcoin you can provide a digital receipt. 

Red Flag 3: You break Fair Housing rules

Do you use race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status, and/or disability as a qualifying factor whether to rent to someone or not?

Or how much rent you'll charge?

Or how you treat them?

Well then, you are breaking the law. And that's a slumlord move. A huge slumlord move.  

This law exists because of bad operators and thankfully it's less of an issue than it use to be. However, it still happens.  

The easy part of this? Follow the law and you are a good person and you will make the same amount of money as someone not following the law. Those breaking Fair Housing laws are prime slumlord material.

I'll let the pun slide, but thanks for hearing me out!

Summary

• Prices (too high or too low) don't make a slumlord
• Safety concerns do make a slumlord
• Law breakers make a slumlord
• Tax dodgers make a slumlord