Question: I want to make sure that my tenants take good care of my property so I don’t allow pets or smoking and I prefer they not have small children. What else can I do to assure my tenants don’t damage the property?

Answer: Those of you that read my column yesterday know this is actually the second part of this article. I promised I would touch more on the subject of “babysitting” tenants, and here it is. The question’s different, but the same principles apply. First off, although this isn’t directly related to the general topic we’ve been discussing, you should know that it violates fair housing laws to disallow tenants based on familial status. You shouldn’t show a bias against families with small children.

The other part of your question, however, is what I want to discuss. My opinion is that it’s not a good idea to restrict smoking or pets in your rental property. And just so we’re clear, this doesn’t have anything to do with my personal preferences. It’s just an investment decision.

Stay Focused

As an investor you have to learn to focus on the investment, not your personal preferences. I wrote yesterday about how it doesn’t work to babysit your tenants. They’ll resent it at best and leave at worst. Babysitting, in the long run, negatively impacts your investment returns. You may still want to control your tenants, but you should really learn to just get over it.

The smoking and pet question falls into this same category. I’ll share my experience with this. First, I know I’ve turned away a lot of qualified tenants simply because they had a pet or someone smoked. 20-20 hindsight tells me I would have rather had a great tenant with a pet than a lousy tenant without one. This is an investment. Focus on finding a tenant that will make your investment work for you.

Here’s something else I found…most tenants will tell you want they think you want to hear. I don’t think this makes them bad people (we all do this to some extent), but don’t kid yourself. They will be as positive as possible when it comes to stating their income, past rental history, etc. They will also tell you they don’t smoke and have no pets if they think that will negatively affect their ability to qualify.

I want to give my potential tenants every opportunity to be honest with me. The more accurate information I have, the more effective I can be at determining what it will take for my investment to work. For example, if my tenants know I have a no pet policy they are more likely to say they have no pets. That doesn’t mean everyone will lie, simply that I am creating pressure for them to be less than honest. I am far better off telling them I allow pets and create a space for them to be honest. Then I adjust my lease agreement to accommodate their situation. Once I know the truth I can perhaps charge additional security deposits for pets and at least make an informed investment decision.

The same applies with smoking. I would rather know and have additional cleaning deposits than not know and leave my investment exposed to unknown risk. It’s a simple investment decision.

Let Go

Stop trying to judge and control the way your tenants live their lives. It’s somewhat amusing to me the number of investors that come into my office with all kinds of judgments about renters. They assume renters are irresponsible people who don’t take care of things either physically or financially. First off, I can just about promise you that if that’s what you believe it’s probably also what you’ll get. Second, I can tell you that it just isn’t true.

This may sound odd, but I love my tenants. Even when I disagree with some of the decisions they make, I love my tenants. For one thing, I believe loving them is a better way to live than stressing about them. Also, my tenants have allowed me to experience phenomenal returns with my investments. And those returns never truly skyrocketed until I stopped judging them and just let them live their lives.

At the end of the day, what I want is a tenant who keeps their word and pays rent. Yes, I would like for them to care for my investment the way I would, but I can’t control that so I’m not going to expend any energy trying. If they don’t pay, they don’t stay. If they do pay, I just want to do what I can to keep them there. I want to make their lives easier, not harder.

Next Please

I’m somewhat famous around the office for my low-energy approach to tenants and problems. I know my investments are working for me. Sure, there are hiccups and unexpected events that come up. But I’m too busy focusing on the positive to worry about the negative. In fact, as most people who know me have heard, I’m all about “Next Please.” That’s my phrase for when faced with those inevitable surprises in my investing. “Next Please.” I move on and make the best decision I can make for my investments.

One thing I know doesn’t work, judging or punishing my next tenants because my last tenants had a dog that scratched up the back door. I just want to make the best investment decision I can make. You would do well to do the same.